ROVER GROUP, INC. (Form: 8-K/A, Received: 08/16/2021 06:40:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

August 16, 2021 (July 30, 2021)

(Date of Report (date of earliest event reported)

ROVER GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		001-39774		85-3147201
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification Number)

720 Olive Way, 19^th Floor, Seattle, WA		98101
(Address of principal executive offices)		(Zip Code)

(888) 453-7889

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each

exchange on which registered

Class A common stock, par value $0.0001 per share

ROVR

The Nasdaq Global Select Market

Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50

ROVRW

The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

INTRODUCTORY NOTE

This Amendment No. 1 to Current Report on Form 8-K/A (“Amendment No. 1”) amends the Current Report on Form 8-K of Rover Group, Inc., a Delaware corporation (the “Company”), filed on August 5, 2021 (the “Original Report”), in which the Company reported, among other events, the completion of the Merger (as defined in the Original Report).

This Amendment No. 1 is being filed in order to include (a) the unaudited condensed consolidated financial statements of A Place for Rover, Inc., a Delaware corporation (“Legacy Rover”), as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, (b) Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy Rover for the three and six months ended June 30, 2021 and 2020, and (c) the unaudited pro forma condensed combined financial information as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020.

This Amendment No. 1 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or its subsidiaries, including Legacy Rover, subsequent to the filing date of the Original Report. The information previously reported in or filed with the Original Report is hereby incorporated by reference into this Form 8-K/A.

Item 9.01.

Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

The unaudited condensed consolidated financial statements of Legacy Rover as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, and the related notes thereto are attached as Exhibit 99.1 and are incorporated herein by reference. Also included as Exhibit 99.2 and incorporated herein by reference is Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy Rover for the three and six months ended June 30, 2021 and 2020.

(b) Pro forma financial information.

Certain unaudited pro forma condensed combined financial information for the Company as of June 30, 2021 and for the six months ended June 30, 2021 and the year ended December 31, 2020 is attached hereto as Exhibit 99.3 and is incorporated herein by reference.

(d) Exhibits.

EXHIBIT INDEX

Exhibit No.		Description
99.1		Unaudited Condensed Consolidated Financial Statements of Legacy Rover as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020.
99.2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for Legacy Rover for the three and six months ended June 30, 2021 and 2020.
99.3		Unaudited Pro Forma Condensed Consolidated Combined Financial Statements of the Company as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020.
104		Cover Page Interactive Data File.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Dated: August 16, 2021

	ROVER GROUP, INC.

	By:		/s/ Tracy Knox
			Name: Tracy Knox
			Title: Chief Financial Officer

Exhibit 99.1

A Place for Rover, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	December 31,			June 30,
	2020			2021
Assets
Current assets
Cash and cash equivalents	$	80,848		$	103,386
Accounts receivable, net		2,992			12,187
Prepaid expenses and other current assets		3,629			2,782
Total current assets		87,469			118,355
Property and equipment, net		24,923			22,914
Operating lease right-of-use assets		—			21,876
Intangible assets, net		7,967			6,162
Goodwill		33,159			33,159
Deferred tax asset, net		1,235			1,574
Other noncurrent assets		134			4,955
Total assets	$	154,887		$	208,995
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities
Accounts payable	$	1,301		$	2,813
Accrued compensation and related expenses		3,269			4,381
Accrued expenses and other current liabilities		2,747			5,545
Deferred revenue		751			8,167
Pet parent deposits		7,931			33,838
Pet service provider liabilities		6,140			8,680
Debt, current portion		4,128			7,746
Operating lease liabilities, current portion		—			2,303
Total current liabilities		26,267			73,473
Deferred rent, net of current portion		2,248			—
Debt, net of current portion		33,398			29,969
Operating lease liabilities, net of current portion		—			26,193
Other noncurrent liabilities		4,659			783
Total liabilities		66,572			130,418
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $0.00001 par value, 87,611 shares authorized as of December 31, 2020 and June 30, 2021; 87,497 shares issued and outstanding as of December 31, 2020 and June 30, 2021; aggregate liquidation preference of $294,802 as of December 31, 2020 and June 30, 2021		290,427			290,427
Stockholders’ deficit:
Common stock, $0.00001 par value, 144,250 shares authorized as of December 31, 2020 and June 30, 2021; 29,288 and 30,437 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively		—			—
Additional paid-in capital		53,912			57,542
Accumulated other comprehensive income		253			282
Accumulated deficit		(256,277	)		(269,674	)
Total stockholders’ deficit		(202,112	)		(211,850	)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit	$	154,887		$	208,995

The accompanying notes are an integral part of these condensed consolidated financial statements.

A Place for Rover, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
Revenue	$	5,381		$	24,482		$	22,372		$	36,678
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		6,209			6,283			11,627			10,459
Operations and support		2,482			3,482			7,537			5,715
Marketing		2,146			4,462			11,496			7,128
Product development		4,927			5,086			13,738			9,554
General and administrative		4,601			5,732			10,803			12,368
Depreciation and amortization		2,100			1,849			4,862			3,699
Total costs and expenses		22,465			26,894			60,063			48,923
Loss from operations		(17,084	)		(2,412	)		(37,691	)		(12,245	)
Other income (expense), net:
Interest income		129			4			461			8
Interest expense		(1,009	)		(703	)		(1,258	)		(1,400	)
Other expense, net		(144	)		(26	)		(188	)		(77	)
Total other income (expense), net		(1,024	)		(725	)		(985	)		(1,469	)
Loss before benefit from income taxes		(18,108	)		(3,137	)		(38,676	)		(13,714	)
Benefit from income taxes		29			331			52			317
Net loss	$	(18,079	)	$	(2,806	)	$	(38,624	)	$	(13,397	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.63	)	$	(0.09	)	$	(1.35	)	$	(0.45	)
Weighted-average shares used in computing net loss per share, basic and diluted		28,699			30,189			28,660			29,837

The accompanying notes are an integral part of these condensed consolidated financial statements.

A Place for Rover, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
Net loss	$	(18,079	)	$	(2,806	)	$	(38,624	)	$	(13,397	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(281	)		8			(140	)		29
Unrealized gain on available-for-sale debt securities		155			—			40			—
Other comprehensive income (loss)		(126	)		8			(100	)		29
Comprehensive loss	$	(18,205	)	$	(2,798	)	$	(38,724	)	$	(13,368	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

A Place for Rover, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(in thousands)

(unaudited)

	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Income (Loss)			Deficit			Deficit
Balance as of December 31, 2019		87,489	$	290,365		28,533	$	—	$	46,926	$	169		$	(198,792	)	$	(151,697	)
Issuance of Series G redeemable convertible preferred stock to settle Barking Dog Ventures, Ltd. holdback		8		62		—		—		—		—			—			—
Issuance of common stock from exercises of stock options		—		—		123		—		134		—			—			134
Stock-based compensation		—		—		—		—		1,585		—			—			1,585
Issuance of common stock warrants		—		—		—		—		657		—			—			657
Foreign currency translation adjustments		—		—		—		—		—		141			—			141
Unrealized loss on available-for-sale debt securities		—		—		—		—		—		(115	)		—			(115	)
Net loss		—		—		—		—		—		—			(20,545	)		(20,545	)
Balance as of March 31, 2020		87,497		290,427		28,656		—		49,302		195			(219,337	)		(169,840	)
Issuance of common stock from exercises of stock options		—		—		83		—		117		—			—			117
Stock-based compensation		—		—		—		—		894		—			—			894
Foreign currency translation adjustments		—		—		—		—		—		(281	)		—			(281	)
Unrealized gain on available-for-sale debt securities		—		—		—		—		—		155			—			155
Net loss		—		—		—		—		—		—			(18,079	)		(18,079	)
Balance as of June 30, 2020		87,497	$	290,427		28,739	$	—	$	50,313	$	69		$	(237,416	)	$	(187,034	)


	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Income (Loss)			Deficit			Deficit
Balance as of December 31, 2020		87,497	$	290,427		29,288	$	—	$	53,912	$	253		$	(256,277	)	$	(202,112	)
Issuance of common stock from exercises of stock options		—		—		453		—		666		—			—			666
Stock-based compensation		—		—		—		—		1,001		—			—			1,001
Foreign currency translation adjustments		—		—		—		—		—		21			—			21
Net loss		—		—		—		—		—		—			(10,591	)		(10,591	)
Balance as of March 31, 2021		87,497		290,427		29,741		—		55,579		274			(266,868	)		(211,015	)
Issuance of common stock from exercises of stock options		—		—		378		—		816		—			—			816
Issuance of common stock from net exercise of common stock warrants		—		—		318		—		—		—			—			—
Stock-based compensation		—		—		—		—		1,147		—			—			1,147
Foreign currency translation adjustments		—		—		—		—		—		8			—			8
Net loss		—		—		—		—		—		—			(2,806	)		(2,806	)
Balance as of June 30, 2021		87,497	$	290,427		30,437	$	—	$	57,542	$	282		$	(269,674	)	$	(211,850	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

A Place for Rover, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2020			2021
OPERATING ACTIVITIES
Net loss	$	(38,624	)	$	(13,397	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock-based compensation		2,479			2,148
Depreciation and amortization		11,243			7,177
Non-cash operating lease costs		—			950
Net amortization of investment premiums		9			—
Amortization of debt issuance costs		240			238
Deferred income taxes		(96	)		(329	)
Loss on disposal of property and equipment		177			10
Changes in operating assets and liabilities:
Accounts receivable		760			(9,188	)
Prepaid expenses and other current assets		518			712
Other noncurrent assets		—			38
Accounts payable		(4,730	)		1,512
Accrued expenses and other current liabilities		(4,727	)		980
Deferred revenue and pet parent deposits		(11,652	)		33,321
Pet service provider liabilities		(3,646	)		2,540
Operating lease liabilities		—			(1,057	)
Other noncurrent liabilities		1,148			111
Net cash (used in) provided by operating activities		(46,901	)		25,766
INVESTING ACTIVITIES
Purchase of property and equipment		(455	)		(393	)
Capitalization of internal-use software		(3,969	)		(2,988	)
Proceeds from disposal of property and equipment		—			19
Purchases of available-for-sale securities		(16,286	)		—
Proceeds from sales of available-for-sale securities		5,367			—
Maturities of available-for-sale securities		17,830			—
Net cash provided by (used in) investing activities		2,487			(3,362	)
FINANCING ACTIVITIES
Proceeds from exercise of common stock options		251			1,482
Payment of deferred transaction costs		—			(1,352	)
Proceeds from borrowing on credit facilities		64,401			—
Net cash provided by financing activities		64,652			130
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		22			4
Net increase in cash, cash equivalents, and restricted cash		20,260			22,538
Cash, cash equivalents, and restricted cash beginning of period		67,654			80,848
Cash, cash equivalents, and restricted cash end of period	$	87,914		$	103,386
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	49		$	7
Cash paid for interest	$	729		$	1,138
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment in accounts payable and accrued liabilities	$	8		$	—
Issuance of common stock warrants under credit facility and subordinated credit facility agreements	$	657		$	—
Issuance of Series G redeemable convertible preferred stock to settle Barking Dog Ventures, Ltd. Holdback	$	62		$	—
Deferred transaction costs included in accrued expenses and other current liabilities	$	—		$	3,430
Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$	87,870		$	103,386
Restricted cash included in prepaid expenses and other current assets		44			—
Total cash, cash equivalents and restricted cash	$	87,914		$	103,386

The accompanying notes are an integral part of these condensed consolidated financial statements.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

1. Organization and Description of Business

A Place for Rover, Inc., (the “Company” or “Rover”) a Delaware corporation was incorporated on June 16, 2011 and is headquartered in Seattle, Washington, with offices in Spokane, Washington and internationally in Barcelona, Spain. The Company provides an online marketplace and other related tools, support, and services that pet parents and pet service providers can use to find, communicate with, and interact with each other.

On July 30, 2021 (the “Closing Date”), Nebula Caravel Acquisition Corp. (“Caravel”), consummated the previously announced merger pursuant to a Business Combination Agreement and Plan of Merger, dated February 10, 2021 (the “Business Combination Agreement”) with Fetch Merger Sub, Inc., a wholly-owned subsidiary of Caravel (“Merger Sub”), and Rover. Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into Rover, with Rover continuing as the surviving entity and as a wholly owned subsidiary of Caravel (together with the other transactions described in the Business Combination Agreement, the “Merger”). On the Closing Date, Caravel changed its name from Nebula Caravel Acquisition Corp. to “Rover Group, Inc.” (“New Rover”).

As a result of the Merger, New Rover raised gross proceeds of $268.3 million, including the contribution of $275.1 million of cash held in Caravel’s trust account from its initial public offering, net of the redemption of Caravel common stock held by Caravel’s public stockholders of $146.8 million, $50.0 million private investment in public equity (“PIPE”) at $10.00 per share of New Rover Class A Common Stock, and $80.0 million of additional gross proceeds from the backstop subscription agreement with True Wind Capital II, L.P. and True Wind Capital II-A, L.P. (together, the “TWC Funds”) (the “Sponsor Backstop Subscription Agreement”). Under the Sponsor Backstop Subscription Agreement, TWC Funds purchased an aggregate of 8,000,000 shares of New Rover Class A Common Stock at $10.00 per share. In addition, pursuant to an assignment and assumption agreement entered into between BBCM Master Fund Ltd. (“Broad Bay”), TWC Funds, and Caravel on July 26, 2021 (the “Assignment Agreement”), New Rover raised additional gross proceeds of $10.0 million from the sale of New Rover Class A Common Stock at $10.00 per share (see Note 15—Subsequent Events).

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus that causes the disease COVID-19 a global pandemic and recommended containment and mitigation measures worldwide, including travel restrictions and business slowdowns or shutdowns in affected areas. As a result, there has been a significant decline in demand for pet services. As a result of these developments, the Company experienced an unfavorable impact on its revenue, results of operations and cash flows in 2020 and in periods to date in 2021.

The Company may face longer term impact from COVID-19 due to, among other factors, evolving federal, state and local restrictions and shelter-in-place orders, changes in consumer behavior and health concerns which may impact customer demand and availability of pet service providers.

The current events and economic conditions are significant in relation to the Company’s ability to fund its business operations. In response to the impact of COVID-19, the Company implemented a number of measures to minimize cash outlays, including reducing discretionary marketing and other expenses and implementing a restructuring plan in April 2020 whereby approximately 50% of employees were terminated or placed on standby. In connection with this restructuring, the Company incurred severance-related and legal costs, and modified the terms of stock options previously awarded to impacted employees.

Additionally, in March 2020, the Company borrowed $11.4 million and $15.0 million under the revolving loan and growth capital advance components, respectively, of the credit facility, and $30.0 million under the subordinated credit facility (see Note 7—Debt). In April 2020, the Company was approved for and received a $8.1 million loan from the Small Business Administration’s Paycheck Protection Program (see Note 7—Debt). In July 2021, the Company fully repaid the subordinated credit facility and the loan from the Small Business Administration’s Paycheck Protection Program (see Note 15—Subsequent Events).

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

Liquidity

The Company has incurred losses from operations since its inception and has an accumulated deficit of $269.7 million as of June 30, 2021. The Company has primarily funded its operations with proceeds from the issuance of redeemable convertible preferred stock and other equity transactions, debt borrowings, and with customer payments. Management expects operating losses to continue in the foreseeable future as the Company continues to invest in expansion activities. Management believes that the Company’s current cash and cash equivalents will be sufficient to fund its operations for at least the next 12 months from the issuance of these condensed consolidated financial statements.

The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties. The Company’s actual results could vary as a result of its near and long-term future capital requirements that will depend on many factors including its growth rate. The Company has based its estimates on assumptions that may prove to be wrong, and it could use its available capital resources sooner than its currently expects. The Company may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, the Company may not be able to raise it on acceptable terms or at all. If the Company is unable to raise additional capital when desired, or if it cannot expand its operations or otherwise capitalize on its business opportunities because it lacks sufficient capital, its business, operating results, and financial condition would be adversely affected.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of all intercompany balances and transactions. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 and the related notes which provide a more complete discussion of the Company’s accounting policies and certain other information. The December 31, 2020 condensed consolidated balance sheet was derived from the Company’s audited financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial information. The condensed consolidated results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes for the fiscal year ended December 31, 2020.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated balance sheet and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions, include, but are not limited to, the capitalization and estimated useful life of the Company’s internal-use software development costs and the assumptions used in the valuation of common and preferred stock. These estimates and assumptions are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.

Segment Information

The Company has one operating segment and one reportable segment. As the Company’s chief operating decision maker, the Chief Executive Officer reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Substantially all long-lived assets are located in the United States and substantially all revenue is attributed to fees from pet parents and pet service providers based in the United States.

Foreign Currencies

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency, including U.S. dollars. Gains and losses on those foreign currency transactions are included in determining net loss for the period of exchange and are recorded in other expense, net in the condensed consolidated statements of operations. The net effect of foreign currency gains and losses was not material during the three and six months ended June 30, 2020 and 2021.

Certain Significant Risks and Uncertainties

The Company is subject to certain risks and challenges associated with other companies at a similar stage of development, including risks associated with: dependence on key personnel; marketing; adaptation to changing market dynamics and customer preferences; and competition including from larger companies that may have greater name recognition, longer operating histories, more and better established customer relationships and greater resources than the Company.

The Company’s ability to provide a reliable platform largely depends on the efficient and consistent operation of its computer information systems and those of its third-party service providers. Any significant interruptions could harm the Company’s business and reputation and result in a loss of business. Further, there has been evidence that the Company has been the subject of cyber-attacks, and it is possible that it will be subject to similar attacks in the future. These attacks may be primarily aimed at interrupting the Company’s business, exposing it to financial losses, or exploiting information security vulnerabilities. To management’s knowledge, no prior attacks or breaches have, individually, or in the aggregate, resulted in any material liability to the Company, any material damage to its reputation, or any material disruption to the Company’s business.

Other than policies noted below, there have been no significant changes to the significant accounting policies disclosed in Note 2 – Summary of Significant Accounting Policies of the audited consolidated financial statements as of and for the year ended December 31, 2020.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash, investments and accounts receivable. The Company maintains cash balances that may exceed the insured limits set by the Federal Deposit Insurance Corporation. The Company reduces credit risk by placing cash balances with major United States financial institutions that management assesses to be of high-credit quality.

For the three and six months ended June 30, 2020 and 2021, no individual pet service provider, pet parent, or affiliate represented 10% or more of the Company’s revenue. As of December 31, 2020 and June 30, 2021, accounts receivable was $3.0 million and $12.2 million, respectively, and was comprised primarily of amounts due from payment processors who collected payment from pet parents on behalf of the Company.

Internal-Use Software

The Company capitalized software development costs of $4.0 million and $3.0 million during the six months ended June 30, 2020 and 2021, respectively. Stock-based compensation costs included in capitalized internal-use software

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

development costs were not material for three and six months ended June 30, 2020 and 2021. The Company recorded amortization expense for capitalized internal use software of $1.9 million and $3.8 million for the three and six months ended June 30, 2020, respectively, and $1.8 million and $3.5 million for the three and six months ended June 30, 2021, respectively, which is included in cost of revenue (exclusive of depreciation and amortization shown separately) in the condensed consolidated statements of operations.

Capitalized website development and internal-use software costs are included in property and equipment, net in the condensed consolidated balance sheets.

Leases (since January 1, 2021)

The Company determines if an arrangement is or contains a lease at contract inception by assessing whether the arrangement contains an identified asset and whether the lessee has the right to control such asset. Lessees are required to classify leases as either finance or operating leases and to record a right-of-use (“ROU”) asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. The Company determines the initial classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified. The Company does not have material finance leases.

For leases with a term greater than 12 months, the Company records the related ROU asset and lease liability at the present value of lease payments over the term. The term of the Company’s leases equals the non-cancellable period of the lease, including any rent-free periods provided by the lessor, and also includes options to extend or terminate the lease that the Company is reasonably certain to exercise. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability.

The Company has elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term. The Company has also elected to not separate lease and non-lease components for office equipment leases and, as a result, accounts for lease and non-lease components as one component.

The Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

Lease payments may be fixed or variable; however, only fixed payments are included in the Company’s lease liability calculation. Lease costs for the Company’s operating leases are recognized on a straight-line basis within operating expenses over the lease term. The Company’s lease agreements may contain non-lease components such as common area maintenance, operating expenses or other costs, which are expensed as incurred.

Marketing

Advertising expenses were $0.6 million and $6.4 million during the three and six months ended June 30, 2020, respectively, and $2.9 million and $4.1 million during the three and six months ended June 30, 2021, respectively.

Restructuring Charges

Costs and liabilities associated with restructuring are recorded in the period management commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. One-time employee termination costs are recognized at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Ongoing

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

employee termination benefits are recognized as a liability when it is probable that a liability exists and the amount is reasonably estimable. Restructuring charges are recognized as an operating expense within the consolidated statements of operations and related liabilities are recorded within accrued compensation and related expenses on the consolidated balance sheets. The Company periodically evaluates and, if necessary, adjusts its estimates based on currently available information.

Deferred Transaction Costs

Deferred transaction costs consist of legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Merger. The Company classified $4.8 million of deferred transaction costs related to the Merger not closed as of June 30, 2021 within other noncurrent assets in the condensed consolidated balance sheets. There were no such costs as of December 31, 2020.

Recently Adopted Accounting Pronouncements

The Company is provided the option to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as private companies, including early adoption when permissible. With the exception of standards the Company elected to early adopt, when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as private companies, as indicated below.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended, with guidance regarding the accounting for and disclosure of leases. The standard requires lessees to recognize a ROU asset and lease liability on its consolidated balance sheet for all leases with a term longer than twelve months. This update also requires lessees and lessors to disclose key information about their leasing transactions. The guidance is effective for the Company for the year beginning after December 15, 2021. Early adoption is permitted. The Company early adopted this standard on January 1, 2021 using the transition method that provides for a cumulative-effect adjustment to retained earnings upon adoption. There was no impact on the Company’s accumulated deficit as of January 1, 2021 as a result of the adoption of this standard. The condensed consolidated financial statements for the three and six months ended June 30, 2021 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy. The adoption of the new lease standard resulted in the recognition of operating lease ROU assets of $22.8 million and operating lease liabilities of $29.6 million as of January 1, 2021. In connection with the adoption of this standard, deferred rent, net of current portion of $2.2 million and lease incentives of $4.6 million, which were previously recorded in accrued expenses and other current liabilities and other noncurrent liabilities on the consolidated balance sheet as of December 31, 2020, were derecognized.

The new standard also provided practical expedients for an entity’s ongoing accounting as well as transition. The Company has elected the: (i) short-term lease recognition exemption for all leases that qualify, whereby the Company will not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition; (ii) practical expedient to not separate lease and non-lease components for office equipment leases; and (iii) transition package of three expedients, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs.

In August 2018, the FASB issued ASU 2018-15, Intangible – Goodwill and Other-Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for the Company for the year beginning after December 15, 2020. The Company adopted this standard on January 1, 2021 using the prospective transition method. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. This ASU simplifies accounting for income taxes by removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or gain for other items, the exception to the requirement

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This ASU also includes other requirements related to franchise tax, goodwill as part of a business combination, consolidations, changes in tax laws, and affordable housing projects. The guidance is effective for the Company for the year beginning after December 15, 2021. Early adoption is permitted. The Company early adopted this standard on January 1, 2021. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities from an incurred loss methodology to an expected loss methodology. For assets held at amortized cost basis, the guidance eliminates the probable initial recognition threshold and instead requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses are recorded through an allowance for credit losses, rather than a write-down, limited to the amount by which fair value is below amortized cost. Additional disclosures about significant estimates and credit quality are also required. The guidance is effective for the Company for the year beginning after December 15, 2022. The Company is currently assessing the potential impact of adopting ASU 2016-13 on its condensed consolidated financial statements and does not expect the adoption to have a material impact on its condensed consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance is effective for the Company for the year beginning after December 15, 2021. The Company is currently assessing the potential impact of adopting ASU 2020-01 on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance is effective for the Company for the year beginning after December 15, 2023. The Company is currently assessing the potential impact of adopting ASU 2020-06 on its condensed consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The ASU addresses the previous lack of specific guidance in the accounting standards codification related to modifications or exchanges of freestanding equity-classified written call options (such as warrants) by specifying the accounting for various modification scenarios. The guidance is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted. The Company will apply the amendments of this ASU prospectively to any modifications or exchanges of freestanding equity-classified warrants occurring on or after the effective date. The Company is currently assessing the potential impact of adopting ASU 2021-04 on its condensed consolidated financial statements.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

3. Revenue Recognition

Contract Balances

The Company’s contract liabilities consist of deferred revenue. The changes in the Company’s contract liabilities were as follows (in thousands):

Balance at December 31, 2020	$	751
Bookings and other		43,480
Revenue recognized		(36,064	)
Balance at June 30, 2021	$	8,167

4. Fair Value

The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market fund	$	37,854	$	—	$	—	$	37,854
Total	$	37,854	$	—	$	—	$	37,854

	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market fund	$	37,857	$	—	$	—	$	37,857
Total	$	37,857	$	—	$	—	$	37,857

5. Balance Sheet Components

Property and Equipment, net

The following table presents the detail of property and equipment, net as follows (in thousands):

	December 31,			June 30,
	2020			2021
Computers	$	1,346		$	1,498
Furniture and fixtures		3,906			3,914
Leasehold improvements		13,660			13,663
Internal-use software		20,850			21,775
Total property and equipment		39,762			40,850
Less: Accumulated depreciation and amortization		(14,839	)		(17,936	)
Total property and equipment, net	$	24,923		$	22,914

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

Depreciation and amortization of property and equipment was $0.9 million and $1.8 million for the three and six months ended June 30, 2020, respectively, and $0.9 million and $1.9 million for the three and six months ended June 30, 2021, respectively. Depreciation and amortization of property and equipment was recorded to depreciation and amortization in the condensed consolidated statements of operations. Internal-use software amortization was $1.9 million and $3.8 million for the three and six months ended June 30, 2020, respectively, and $1.8 million and $3.5 million for the three and six months ended June 30, 2021, respectively. Internal-use software amortization was recorded to cost of revenue (exclusive of depreciation and amortization shown separately) in the condensed consolidated statements of operations.

In April 2020, the Company accelerated the amortization of $2.6 million in internal-use software related to the Rover Now service which was discontinued and is recorded in cost of revenue (exclusive of depreciation and amortization shown separately) in the condensed consolidated statements of operations.

Accrued Expenses and Other Current Liabilities

The following table presents the detail of accrued expenses and other current liabilities as follows (in thousands):

	December 31,		June 30,
	2020		2021
Accrued capitalizable transaction expenses	$	—	$	3,430
Income and other tax liabilities		185		661
Accrued professional services		872		485
Accrued legal expenses and open claims		382		481
Accrued interest		259		294
Accrued merchant fees		172		4
Lease incentive, current		491		—
Other current liabilities		386		190
Total accrued expenses and other current liabilities	$	2,747	$	5,545

6. Goodwill and Intangible Assets

Goodwill

The Company tests goodwill for impairment on an annual basis or sooner, if deemed necessary. No impairment of goodwill was recognized during any of the periods presented.

Intangible Assets

The gross book value and accumulated amortization of intangible assets were as follows (in thousands):

	December 31, 2020
	Gross Book Value		Accumulated Amortization			Net Book Value
Pet parent relationships	$	16,290	$	(9,117	)	$	7,173
Pet service provider relationships		2,000		(1,444	)		556
Tradenames		950		(712	)		238
Total	$	19,240	$	(11,273	)	$	7,967

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

	June 30, 2021
	Gross Book Value		Accumulated Amortization			Net Book Value
Pet parent relationships	$	16,290	$	(10,493	)	$	5,797
Pet service provider relationships		2,000		(1,778	)		222
Tradenames		950		(807	)		143
Total	$	19,240	$	(13,078	)	$	6,162

The weighted average amortization period remaining as of June 30, 2021 for each class of intangible assets were as follows (in years):

Pet parent relationships			4.2
Pet service provider relationships			0.3
Tradenames			0.8

Amortization expense related to acquired intangible assets for the three and six months ended June 30, 2020 was $1.2 million and $3.0 million, respectively, and $0.9 million and $1.8 million for the three and six months ended June 31, 2021, respectively. The Company did not recognize any intangible asset impairment losses for any of the periods presented.

Based on amounts recorded at June 30, 2021 the Company estimates intangible asset amortization expense in each of the years ending December 31 as follows (in thousands):

Remainder of 2021	$	1,694
2022		1,347
2023		814
2024		814
2025		814
Thereafter		679
Total	$	6,162

7. Debt

In March 2020, the Company borrowed $11.4 million and $15.0 million under the variable rate revolving line of credit and variable rate growth capital advance components, respectively, of the credit facility, and $30.0 million under the subordinated credit facility.

In April 2020, the Company was approved for and received a $8.1 million loan from the Small Business Administration’s Paycheck Protection Program.

In August 2020, the Company repaid the outstanding balance of the revolving line of credit and the growth capital advance.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

Revolving Line of Credit

The Company renegotiated the credit facility during August 2020 to extend the maturity of the revolving line of credit to May 2022. Subject to the terms and conditions of the credit facility, the lender agreed to make revolving loans to the Company in an amount not to exceed $15.0 million during the term of the agreement. Interest accrues at the greater of (1) 4.50% and (2) the Prime Rate plus a margin of 0.50% per year (4.50% at June 30, 2021), unless certain milestones are achieved then interest accrues at the greater of (1) 4.00% and (2) the Prime Rate. Interest is payable monthly. The Company is required to pay an unused credit facility fee to the lender each quarter in an amount equal to 0.30% per year times the average unused portion of the revolving line. The Company borrowed and repaid $11.4 million on the revolving loan during the year ended December 31, 2020 and issued a $3.5 million letter of credit for the security deposit on its Seattle headquarters office space, which reduced the amount available under the revolving line of credit. The Company had $11.4 million available to borrow under the revolving line of credit at June 30, 2021.

Growth Capital Advance

The Company renegotiated the credit facility during August 2020 to amend the growth capital advance component, including extending the maturity to June 2024. Subject to the terms and conditions of the credit facility, the lender agreed to make advances to the Company in three tranches not to exceed $5.0 million under each tranche, up to the total amount of $15.0 million during the draw period, which was available until June 30, 2021. During 2020, the Company had drawn on the $15.0 million growth capital advance and repaid the outstanding balance. At June 30, 2021, no amounts were outstanding, and the Company can no longer borrow under the growth capital advance component of the credit facility.

Subordinated Credit Facility

The subordinated credit facility is a term loan advance. Subject to the terms and conditions of the subordinated credit facility, the lender agreed to make advances to the Company to the amount of $30.0 million during the draw period, which was available until June 30, 2020. After principal repayments, no term loan advance may be reborrowed. The term loan advance is interest only on a monthly basis. Outstanding principal and accrued interest are due at the maturity date. Interest accrues at the Prime Rate plus a margin of 4.25% per year (7.50% at June 30, 2021). In connection with securing the term loan advance, the Company incurred $269,000 in costs related to originating the debt which were initially capitalized as debt issuance costs. Once the term loan advance of $30.0 million was drawn down in March 2020, the costs were recorded as a debt discount and amortized to interest expense over the term of the term loan advance. At June 30, 2021, the Company has drawn the full $30.0 million term loan advance, which matures in August 2022, and no longer has the ability to make any future draws.

The Company has collateralized the credit facility and the subordinated credit facility with substantially all of its tangible and intangible assets. The credit facility includes several affirmative and negative covenants, as well as financial covenants. Financial covenants include minimum liquidity and minimum net revenue amounts and are applicable if the Company’s overall liquidity, as renegotiated in March 2021, is less than or equal to $65.0 million at the end of a reporting period. If the Company defaulted under the terms of the credit facility, it would not be permitted to draw additional funds on the revolving line of credit and the lenders could accelerate the Company’s obligation to pay all outstanding amounts. The Company is in compliance with all of its financial covenants as of June 30, 2021.

In conjunction with the credit facility and the subordinated credit facility, the Company issued warrants to the lenders to purchase the Company’s common stock.

Small Business Administration’s Paycheck Protection Program

In April 2020, the Company entered into the Paycheck Protection Program (“PPP”) Promissory Note and Agreement with a lender (the “PPP Loan”), pursuant to which it incurred $8.1 million aggregate principal amount of term borrowings. The PPP Loan was made under, and was subject to the terms and conditions of, the PPP which was established under the Coronavirus Aid, Relief, and Economic Security Act and is administered by the U.S. Small Business Administration. The term of the PPP Loan is two years with a maturity date of April 2022 and accrues interest at a rate of 1.00% per year. Interest is payable monthly. Payments of principal and interest on the PPP Loan

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

are deferred until August 2021. The PPP Loan is eligible for forgiveness if the proceeds are used for qualified purposes within a specified period, however Rover expects to repay principal and accrued interest on the PPP Loan. At June 30, 2021, $8.1 million aggregate principal amount of borrowings was outstanding under the PPP Loan.

As of June 30, 2021, future minimum payments of principal on the Company’s outstanding debt borrowings were as follows for the years ending December 31 (in thousands):

Year Ending December 31	Amounts
Remainder of 2021	$	4,505
2022		33,619
2023		—
2024		—
2025		—
Total principal amount		38,124
Unamortized discount		(409	)
Carrying value of debt	$	37,715

In July 2021, the Company fully repaid the subordinated credit facility and the Paycheck Protection Program loan in connection with the Merger close (see Note 15—Subsequent Events).

8. Commitments and Contingencies

Leases

The Company leases certain office space in Seattle and Spokane, Washington with the lease terms ranging from 84 to 137 months. The Company also leases office space in Barcelona, Spain with a lease term less than 12 months. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease for an additional 1 to 7 years. These renewal options have not been considered in the determination of the ROU assets and lease liabilities associated with these leases as the Company has determined it is not reasonably certain it will exercise such options.

In September 2018, the Company entered into a non-cancellable sublease agreement for a portion of one of its leased facilities that commenced on November 1, 2018. In February 2020, the Company amended the sublease to extend the term for an additional two years. Under the terms of the amended sublease agreement, the Company will receive an additional $1.4 million in base lease payments plus reimbursement of certain operating expenses over the term of the sublease, which ends in October 2022.

In April 2021, the Company entered into a non-cancellable sublease agreement for a portion of one of its leased facilities that commences on September 1, 2021. Under the terms of the sublease agreement, the Company will receive $1.7 million in base lease payments plus reimbursement of certain operating expenses over the term of the sublease, which ends in August 2024. The subtenant has the option to renew the sublease for one additional year.

The components of lease cost were as follows (in thousands):

	Three Months Ended			Six Months Ended
	June 30, 2021			June 30, 2021
Operating lease cost	$	983		$	1,965
Short-term lease cost		59			118
Sublease income		(174	)		(344	)
Total lease cost	$	868		$	1,739

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

Other information related to leases was as follows (in thousands):

	Six Months Ended
	June 30, 2021
Cash paid for operating lease liabilities	$	2,072

Lease term and discount rate were as follows:

	As of
	June 30, 2021
Weighted-average discount rate		7.23	%
Weighted-average remaining lease term (years)		8.27

Maturities of lease liabilities were as follows as of June 30, 2021 (in thousands):

Year Ending December 31	Amounts
Remainder of 2021	$	2,115
2022		4,313
2023		4,433
2024		4,563
2025		4,693
Thereafter		18,209
Total lease payments		38,326
Less: imputed interest		(9,830	)
Present value of lease liabilities		28,496
Less: current portion of lease liabilities		(2,303	)
Total lease liabilities, noncurrent	$	26,193

Under ASC Topic 840, Leases (“ASC 840”), contractual commitments related to operating leases were as follows as of December 31, 2020 (in thousands):

Year Ending December 31	Amounts
2021	$	4,356
2022		4,303
2023		4,433
2024		4,563
2025		4,693
Thereafter		18,209
Total	$	40,557

Net rent expense was $0.9 million and $1.8 million for the three and six months ended June 30, 2020, respectively. Net rent expense includes sublease income of $0.2 million and $0.4 million for the three and six months ended June 30, 2020, respectively .

Guarantees and Indemnification

In the ordinary course of business to facilitate sales of its services, the Company has entered into agreements with, among others, suppliers, and partners that include guarantees or indemnity provisions. The Company also enters into indemnification agreements with its officers and directors, and the Company’s certificate of incorporation and bylaws include similar indemnification obligations to its officers and directors. To date, there have been no claims under any indemnification provisions, therefore there is no accrual of such amounts for any of the periods presented. The Company is unable to determine the maximum potential impact of these indemnifications on the condensed

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

consolidated financial statements and maintains director and officer insurance coverage that would generally enable it to recover a portion of any future amounts paid.

Litigation and Other

From time to time, the Company may be a party to litigation and subject to claims incurred in the ordinary course of business, including personal injury and indemnification claims, intellectual property claims, labor and employment claims, threatened claims, breach of contract claims, and other matters. The Company accrues a liability when management believes information available prior to the issuance of the condensed consolidated financial statements indicates it is probable a loss has been incurred as of the date of the condensed consolidated financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal costs are expensed as incurred. Although the results of litigation and claims are inherently unpredictable, management concluded that there was not a reasonable possibility that it had incurred a material loss during the periods presented related to such loss contingencies. Therefore, the Company has not recorded a reserve for any contingencies.

Given the inherent uncertainties of litigation, the ultimate outcome of the ongoing matters cannot be predicted with certainty. While litigation is inherently unpredictable, the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the condensed consolidated financial statements could be materially adversely affected in a particular period by the resolution of one or more of these contingencies. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved; and such changes are recorded in the accompanying condensed consolidated statements of operations during the period of the change and reflected in accrued and other current liabilities on the accompanying condensed consolidated balance sheets.

In addition, the Company may also find itself at greater risk to outside party claims or regulatory actions as it increases and continues its operations in jurisdictions where the laws with respect to the potential liability of online marketplaces or the employment classification of service providers who use online marketplaces are uncertain, unfavorable or unclear.

Additionally, from time to time, the Company may become subject to audit by taxing authorities or subject to other forms of inspection or audit. Due to the uncertainties inherent in the final outcome of such matters, the Company can give no assurance that it will prevail in such matters which could have an adverse effect on the Company’s business. As of December 31, 2020 and June 30, 2021, the Company was not aware of any currently pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on its condensed consolidated financial statements.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

9. Redeemable Convertible Preferred Stock

The Company had outstanding redeemable convertible preferred stock as of December 31, 2020 and June 30, 2021 as follows (in thousands, except per share amounts):

	Shares Authorized		Shares Issued and Outstanding		Issuance Price Per Share		Net Carrying Value		Liquidation Preference
Series A		8,710		8,710	$	0.4647	$	3,325	$	4,048
Series B		14,104		14,104		0.6775		9,397		9,556
Series C		12,431		12,431		1.1665		14,596		14,500
Series D		7,677		7,677		2.0841		14,036		16,000
Series D-1		3,359		3,359		2.0841		6,981		7,000
Series E		11,021		11,021		3.6294		39,906		40,000
Series F		11,772		11,772		5.5215		64,833		65,000
Series G		18,537		18,423	$	7.5285		137,353		138,698
Total		87,611		87,497			$	290,427	$	294,802

The preferred stock agreements contain provisions that, in the event of a change in the control of the Company, give the holders of the series of redeemable convertible preferred stock the right to receive a cash distribution equal to the liquidation preference on the redeemable convertible preferred stock. Due to these redemption characteristics, which are not solely within the Company’s control, the redeemable convertible preferred stock has been presented within the mezzanine section on the condensed consolidated balance sheets. The Company does not adjust the carrying values of the redeemable convertible preferred stock to its deemed liquidation values since a liquidation event was not probable at any of the balance sheet dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.

10. Common Stock

Common Stock

As of June 30, 2021, the Company was authorized to issue 144.3 million shares of common stock with a $0.00001 per share par value. Each holder of a share of common stock is entitled to one vote for each share held at all meetings of stockholders and is entitled to receive dividends whenever funds are legally available and when declared by the board of directors subject to the preferential rights of holders of all classes of stock outstanding. The total common stock outstanding as of December 31, 2020 and June 30, 2021 was 29.3 million and 30.4 million shares, respectively.

The Company had reserved shares of common stock for issuance, on an as-converted basis, as follows (in thousands):

	December 31,		June 30,
	2020		2021
Conversion of redeemable convertible preferred stock		87,497		87,497
Common stock warrants outstanding		1,077		607
Stock options issued and outstanding		20,574		19,484
Shares available for future option grants		4,330		4,589
Total		113,478		112,177

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

Common Stock Warrants

During the six months ended June 30, 2021, a warrant to purchase 470,000 shares of the Company’s common stock was net exercised, resulting in the issuance of 318,190 shares of common stock.

11. Stock-Based Compensation

Stock Options

A summary of stock option activity is as follows (in thousands, except per share amounts and years):

								Weighted-
						Weighted-		Average
	Options		Number of			Average		Remaining		Aggregate
	Available		Options			Exercise Price		Contractual		Intrinsic
	for Grant		Outstanding			Per Share		Term (Years)		Value
Balances as of December 31, 2020		4,330		20,574		$	1.74		6.4	$	83,570
Options exercised		—		(831	)		1.79
Options cancelled and forfeited		259		(259	)		2.35
Balances as of June 30, 2021		4,589		19,484		$	1.73		5.9	$	160,996
Options vested and exercisable – June 30, 2021				14,893		$	1.50		5.1	$	126,601

The weighted-average grant-date fair value of options granted during the three and six months ended June 30, 2020 was $1.18 and $1.13, respectively. There were no options granted during the six months ended June 30, 2021.

The aggregate intrinsic value of stock options exercised during the three and six months ended June 30, 2020 was $0.1 million and $0.4 million, respectively, and was $3.1 million and $6.4 million during the three and six months ended June 30, 2021, respectively.

The fair value of options vested during the three and six months ended June 30, 2020 was $1.4 million and $2.6 million, respectively, and was $0.9 million and $2.0 million during the three and six months ended June 30, 2021, respectively.

Stock-Based Compensation

The following table summarizes stock-based compensation expense recorded in each component of operating expenses in the Company’s condensed consolidated statements of operations for the presented periods (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
Operations and support	$	41	$	48	$	161	$	101
Marketing		51		99		225		167
Product development		273		399		949		694
General and administrative		529		601		1,144		1,186
Total stock-based compensation expense	$	894	$	1,147	$	2,479	$	2,148

No income tax benefit related to stock-based compensation was recorded during the three and six months ended June 30, 2020 and 2021 as the Company maintained a full valuation allowance against its net deferred tax assets within the United States.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

As of June 30, 2021, total unrecognized compensation cost related to unvested stock options was $6.4 million, which was expected to be recognized over a weighted average remaining service period of 2.0 years.

Stock Option Modification

During the year ended December 31, 2020, the Company experienced significant disruption to its business as a result of the rapid development of COVID-19 and the corresponding reduction in the demand for its marketplace services. In response to the impact of COVID-19, the Company implemented a restructuring plan in April 2020 whereby approximately 50% of employees were terminated or placed on standby. In connection with this restructuring, the Company amended the terms of stock options previously awarded to impacted employees. For employees who were terminated as part of the restructuring, the Company allowed pro-rata vesting of pre-cliff awards up to the termination date that would have otherwise been forfeited upon termination and extended the exercise period of vested stock options from 90 days to three years from the termination date. For employees who remained employed after the restructuring, the stock options were modified based on the fair value of the Company’s common stock as determined by the board of directors.

In April 2020, the Company modified 2,584,000 options held by terminated employees. The Company reversed the previously recognized expense for pre-cliff awards, recorded the incremental expense based on the modification-date fair value of awards that became vested under the pro-rata acceleration, and recorded any excess between the fair value of the vested awards immediately prior to and after the modification. The Company immediately recognized net incremental expense of $0.3 million related to these options.

In July 2020, the Company modified 5,700,000 options held by then-current employees. The Company repriced options held by current employees with an exercise price greater than $2.39 per share. As part of the repricing, the original options were canceled and new options were granted with an exercise of $2.39 per share and a remaining contractual term of ten years. The new options were subject to the same service-based vesting schedule as the original options. The repricing was recorded as a stock option modification whereby the incremental fair value of each option was determined at the date of the modification and $0.4 million was immediately recognized related to vested options. During the three and six months ended June 30, 2021, the Company recognized total stock-based compensation expense of $0.1 million and $0.2 million related to these repriced options, respectively. As of June 30, 2021, there was remaining incremental fair value of $0.4 million which will be recognized over the remaining requisite service period.

12. Income Taxes

The Company’s tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items in the related period. The effective tax rate for the three months ended June 30, 2020 and 2021 was 0.2% and 10.5%, respectively, and 0.1% and 2.3% for the six months ended June 30, 2020 and 2021, respectively. The increase in effective tax rate is primarily due to a discrete item in the second quarter 2021 related to the enacted tax law change which increased the general United Kingdom tax rate from 19.0% to 25.0%, effective April 1, 2023 and the effect of U.S. losses being excluded from the Company’s estimated annual effective tax rate due to recording a full valuation allowance on the U.S. deferred tax assets.

During the three and six months ended June 30, 2021, the amount of gross unrecognized tax benefits increased by $3,000 and $7,000, respectively, of which all, if recognized, would not affect the effective tax rate as these unrecognized tax benefits would increase deferred tax assets that would be subject to a full valuation allowance.

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

13. Net Loss Per Share Attributable to Common Stockholders

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive (in thousands):

	June 30,
	2020		2021
Redeemable convertible preferred stock		87,497		87,497
Outstanding stock options		21,917		19,484
Outstanding common stock warrants		1,077		607
Total		110,491		107,588

14. Restructuring

In response to the impact of COVID-19, the Company implemented a restructuring plan in April 2020 whereby approximately 50% of employees were terminated or placed on standby. In connection with this restructuring, the Company incurred total severance-related and legal costs of $3.8 million, as well as modified the terms of stock options previously awarded to impacted employees (see Note 11—Stock-Based Compensation). As of December 31, 2020, there was no remaining liability for restructuring-related costs.

The following table summarizes restructuring charges recorded in each component of costs and expenses in the Company’s condensed consolidated statements of operations (in thousands):

	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Operations and support	$	197	$	621
Marketing		170		508
Product development		534		1,603
General and administrative		258		507
Total restructuring charges	$	1,159	$	3,239

15. Subsequent Events

The Company has evaluated subsequent events through August 13, 2021, the date the financial statements were available to be issued and has determined that the following subsequent events require disclosure in the condensed consolidated financial statements.

On July 30, 2021, the Company completed the Merger and raised net proceeds $233.1 million, net of estimated transaction costs of $35.2 million. Immediately before the Merger, all of the Company’s outstanding warrants were net exercised for shares of common stock. Upon the consummation of the Merger, all holders of common stock and stock options received (or have the right to receive) shares of New Rover Class A Common Stock at a deemed value of $10.379 per share after giving effect to the applicable exchange ratio based on the following transactions contemplated by the Business Combination Agreement:

•

the conversion of all outstanding shares of Rover redeemable convertible preferred stock into shares of Rover common stock at the then-effective conversion rate as calculated pursuant to the Company’s certificate of incorporation;

A PLACE FOR ROVER, INC

Notes to Condensed Consolidated Financial Statements

•

the cancellation of each issued and outstanding share of Rover common stock (including shares of common stock resulting from the conversion of Rover redeemable convertible preferred stock) and the conversion into a number of shares of New Rover Class A Common stock equal to the exchange ratio of 1.0379; and

•

the conversion of all outstanding vested and unvested stock options into options exercisable for shares of New Rover Class A Common Stock with the same terms except for the number of shares exercisable and the exercise price, each of which will be adjusted using the exchange ratio of 1.2006.

Other events that took place in connection with the Merger are summarized below:

•

Issuance and sale of 5,000,000 shares of New Rover Class A Common Stock at a purchase price of $10.00 per share pursuant to the PIPE Investment for proceeds of $50.0 million.

•

Issuance and sale of 8,000,000 shares of New Rover Class A Common Stock at a purchase price of $10.00 per share pursuant to the Sponsor Backstop Subscription Agreement for proceeds of $80.0 million and the issuance and sale of 1,000,000 shares of New RoverClass A Common Stock at a purchase price of $10.00 per share pursuant the Assignment Agreement for proceeds of $10.0 million.

•

Immediately before the Merger, Rover’s chief executive officer (the “CEO”) net exercised 1.8 million outstanding options. 0.7 million shares were withheld to cover the tax withholding and remittance obligations of the Company of $6.8 million. The net exercise of outstanding options by the CEO was contingent on the Merger closing.

•

Repayment of $8.1 million and $30.0 million in principal plus accrued interest to settle amounts outstanding under Rover’s PPP Loan and Subordinated Credit Facility, respectively, following the Merger closing.

Exhibit 99.2

ROVER MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Capitalized terms used but not defined in this Exhibit 99.2 shall have the meanings ascribed to them in the ~~Current Report on Form 8-K~~ (the “Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”) on August 5, 2021 and, if not defined in the Form 8-K, the ~~proxy statement/prospectus~~ filed by Nebula Caravel Acquisition Corp., (“Caravel”) on July 9, 2021 prior to the consummation of the Merger (the “Proxy Statement”).

The following discussion and analysis provides information that Legacy Rover’s management believes is relevant to an assessment and understanding of Rover’s condensed consolidated results of operations and financial condition. The discussion should be read together with Legacy Rover’s unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021, and the respective notes thereto, included as Exhibit 99.1 to the Amendment No. 1 to Current Report on Form 8-K/A filed by Rover Group, Inc. with the SEC on August 16, 2021 (the “Form 8-K/A”).

On July 30, 2021, Legacy Rover and Caravel consummated the previously announced Merger pursuant to that certain Business Combination Agreement. This discussion and analysis should also be read together with Legacy Rover’s unaudited pro forma financial information as of and for the six months ended June 30, 2021 included as Exhibit 99.3 to the Form 8-K/A.

This discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, the Company’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events, or results of operations, including guidance and projections, are forward-looking statements. These statements may be preceded by, followed by, or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “could,” “can,” “would,” “predict,” “potential,” “poised,” “continue,” “ongoing,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negative of these words or similar terms or expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section of the Proxy Statement titled “~~Risk Factors~~”, which has been incorporated by reference into the Form 8-K/A. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

Unless the context otherwise requires, references in this Exhibit 99.2 to “we”, “our” and “the Company” refer to the business and operations of Legacy Rover and its consolidated subsidiaries prior to the Merger.

Overview

Rover was founded to give pet parents an alternative to relying on friends and family, neighbors, and kennels for pet care. Our online marketplace matches pet parents with pet lovers dedicated to providing excellent pet care while earning extra income. Our simple and easy-to-use platform enables pet parents to easily discover and book the right pet care providers for them and their pets, communicate with providers and write and read reviews. Our platform enables pet care providers to list on our marketplace with low startup costs, schedule bookings, communicate with pet parents, and receive payment.

We are the world’s largest, online marketplace for pet care. We connect pet parents with caring pet care providers who offer overnight services, including boarding and in-home pet sitting, as well as daytime services, including doggy daycare, dog walking, drop-in visits, and grooming. Through June 30, 2021, more than two million unique pet parents and more than 580,000 pet care providers across North America and Europe have booked a service on Rover, enabling millions of moments of joy and play for people and pets.

Impact of COVID-19

In December 2019, a novel strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease, COVID-19, has spread to almost every country in the world and all 50 states within the United States. Global health concerns relating to the outbreak of COVID-19 have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. Restrictive measures have not only negatively impacted consumer and business spending habits, but they have also adversely impacted and may further impact our workforce and operations. Although certain of these measures are beginning to ease in some geographic regions, overall measures to contain the COVID-19 outbreak may remain in place for a significant period of time as many geographic regions are experiencing a resurgence of COVID-19 infections, including the new variants of the virus, such as the Delta variant. The duration and severity of this pandemic, including new variants, are unknown, and the extent of the business disruption and financial impact depend on factors beyond our knowledge and control.

Second Quarter 2021 Financial Highlights

•

Revenue of $24.5 million, an increase of 355% from the second quarter 2020.

•

GAAP net loss of $2.8 million, compared to net loss of $18.1 million from the second quarter 2020.

•

Adjusted EBITDA of $2.5 million, marking the Company’s first quarter of positive Adjusted EBITDA, compared to $(8.4) million from the second quarter 2020. See “—Key Business Metrics-Adjusted EBITDA” below for information on this non-GAAP measure and a reconciliation to net income (loss), its most directly comparable GAAP measure.

•

Cash and cash equivalents was $103.4 million as of June 30, 2021.

The second quarter 2021 financial highlights below are relative to Q2 2019, due to the irregularity in our 2020 business metrics caused by COVID.

•

Revenue of $24.5 million, compared to $23.8 million, an increase of 3%.

•

GAAP net loss of $2.8 million, compared to net loss of $12.0 million.

Components of Results of Operations

Revenue

We derive revenue principally from fees paid by pet care providers and pet parents for use of our platform, net of discounts and sales tax paid on behalf of pet parents. We also derive revenue from fees paid by pet care providers for background checks in order to be listed on our platform. We recognize revenue related to the facilitation of the connection between pet care providers and pet parents at the start of a booking.

Costs and Expenses

Cost of Revenue (Exclusive of Depreciation and Amortization Shown Separately)

Cost of revenue (exclusive of depreciation and amortization shown separately) includes fees paid to payment processors for credit card and other funding transactions, server hosting costs, internal-use software amortization, third-party costs for background checks for pet care providers, claim costs paid out under the Rover Guarantee (“Rover Guarantee”) and other direct and indirect costs arising as a result of bookings that take place on our platform. We expect our cost of revenue (exclusive of depreciation and amortization shown separately) will vary from period-to-period on an absolute dollar basis and as a percentage of revenue depending on the timing and pace of recovery of the travel and pet care services market.

Operations and Support

Operations and support expenses include payroll, employee benefits, stock-based compensation and other personnel-related costs associated with our operations and support team, and third-party costs related to outsourced support providers. This team assists with onboarding new pet service providers, quality reviews of pet care provider profiles, fraud monitoring and prevention across our marketplace, and community support provided via phone, email, and chat to our pet parents and pet service providers. This support includes assistance and responding to pet parents’ inquiries regarding the general use of our platform or how to make or modify a booking through our platform. The Company allocates a portion of overhead costs which includes lease expense, utilities and information technology expense to operations and support expense based on headcount. Notwithstanding the decrease in operations and support expenses as a result of the restructuring discussed below, we expect that operations and support expense will increase on an absolute dollar basis for the foreseeable future to the extent that we continue to see growth on our platform. We expect these expenses to decrease as a percentage of revenue over the longer term due to better leverage in our operations.

Marketing

Marketing expenses include payroll, employee benefits, stock-based compensation expense and other personnel-related costs associated with our marketing team. These expenses also include digital marketing, brand marketing, public relations, broadcast television, marketing partnerships and other promotions. Digital marketing primarily consists of targeted promotional campaigns through electronic channels, such as social media, search engine marketing and optimization, affiliate programs and display advertising which are focused on pet parent acquisition and brand marketing. In 2020, we significantly curtailed our discretionary marketing spending in response to the COVID-19 pandemic in addition to reducing headcount to our marketing team as part of our restructuring plan. As our business recovers and we return to growth, we expect that marketing expenses will increase in absolute dollars in future periods and vary from period-to-period as a percentage of revenue in the near-term. Over the longer term, we expect marketing expense to decrease as a percentage of revenue.

Product Development

Product development expenses include payroll, employee benefits, stock-based compensation expense and other headcount related costs for employees in engineering, design and product management, as well as the maintenance and support costs for technology infrastructure, primarily related to non-revenue generating systems. In 2020, we reduced the headcount in our product development team as part of our restructuring plan. As our growth in operations recovers, we expect that our product development expense will increase on an absolute dollar basis and will vary from period-to-period as a percentage of revenue for the foreseeable future as we continue to invest in product development activities relating to ongoing improvements and maintenance of our technology platform. We expect these expenses to decrease as a percentage of revenue over the longer term due to better leverage in our operations.

The costs incurred in the preliminary stages of website and software development related to the platform are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized as internal-use software and amortized on a straight-line basis over their estimated useful lives. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized internal-use software is included in cost of revenue (exclusive of depreciation and amortization shown separately).

General and Administrative

General and administrative expenses include payroll, employee benefits, stock-based compensation expense and other personnel-related costs for employees in corporate functions, as well as management, accounting, legal, corporate insurance and other expenses used to run the business. In 2020, we reduced the headcount in our general and administrative functions as part of our restructuring plan. We expect to incur additional general and administrative expense to support operating as a public company and the overall expected growth in our business. While these expenses may vary from period-to-period as a percentage of revenue, we expect them to decrease as a percentage of revenue over the longer term.

Depreciation and Amortization

Depreciation and amortization expenses include depreciation of our property and equipment, leasehold improvements and amortization of our intangible assets. Amortization related to our internal-use software is included in cost of revenue (exclusive of depreciation and amortization shown separately).

Restructuring

In response to the impact of COVID-19, we implemented a number of measures to minimize cash outlays, implementing a restructuring plan in April 2020 whereby approximately 50% of employees were terminated or put on standby. In connection with this restructuring, we incurred severance-related and legal costs, and modified the terms of stock options previously awarded to impacted employees.

Other Income (Expense), Net

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, and short-term investments.

Interest Expense

Interest expense consists of interest on our borrowing arrangements and the amortization of debt discounts and deferred financing costs.

Other Expense, Net

Other expense, net consists primarily of realized and unrealized gains and losses on foreign currency transactions and realized gains and losses on sales of our securities.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in Exhibit 99.1 to this Amendment No. 1 to Current Report on Form 8-K/A. The following tables set forth our results of operations for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(in thousands)
Revenue	$	5,381		$	24,482		$	22,372		$	36,678
Costs and expenses⁽¹⁾:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		6,209			6,283			11,627			10,459
Operations and support		2,482			3,482			7,537			5,715
Marketing		2,146			4,462			11,496			7,128
Product development		4,927			5,086			13,738			9,554
General and administrative		4,601			5,732			10,803			12,368
Depreciation and amortization		2,100			1,849			4,862			3,699
Total costs and expenses		22,465			26,894			60,063			48,923
Loss from operations		(17,084	)		(2,412	)		(37,691	)		(12,245	)
Other income (expense), net:
Interest income		129			4			461			8
Interest expense		(1,009	)		(703	)		(1,258	)		(1,400	)
Other expense, net		(144	)		(26	)		(188	)		(77	)
Total other income (expense), net		(1,024	)		(725	)		(985	)		(1,469	)
Loss before benefit from income taxes		(18,108	)		(3,137	)		(38,676	)		(13,714	)
Benefit from income taxes		29			331			52			317
Net loss	$	(18,079	)	$	(2,806	)	$	(38,624	)	$	(13,397	)

(1)	Costs and expenses include stock-based compensation expense as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
	(in thousands)
Operations and support	$	41	$	48	$	161	$	101
Marketing		51		99		225		167
Product development		273		399		949		694
General and administrative		529		601		1,144		1,186
Total stock-based compensation expense	$	894	$	1,147	$	2,479	$	2,148

The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented as a percentage of revenue:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
Revenue		100	%		100	%		100	%		100	%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		115			26			52			29
Operations and support		46			14			34			16
Marketing		40			18			51			19
Product development		92			21			61			26
General and administrative		86			23			48			34
Depreciation and amortization		39			8			22			10
Total costs and expenses		418			110			268			134
Loss from operations		(318	)		(10	)		(168	)		(34	)
Other income (expense), net:
Interest income		2			—			2			—
Interest expense		(19	)		(3	)		(6	)		(4	)
Other expense, net		(3	)		—			(1	)		—
Total other income (expense), net		(20	)		(3	)		(5	)		(4	)
Loss before benefit from income taxes		(338	)		(13	)		(173	)		(38	)
Benefit from income taxes		1			1			—			1
Net loss		(337	)%		(12	)%		(173	)%		(37	)%

Comparisons for the Three and Six Months Ended June 30, 2020 and 2021

Revenue

	Three Months Ended June 30,							Six Months Ended June 30,
	2020		2021		% Change			2020		2021		% Change
	(in thousands, except for percentages)
Revenue	$	5,381	$	24,482		355	%	$	22,372	$	36,678		64	%

Revenue increased $19.1 million, or 355%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase in revenue was primarily due to a 220% increase in the number of bookings on our platform as well as a 28% increase in the average gross booking value per booking. Demand for overnight and daytime pet care is primarily linked to pet parents traveling or working outside of the home which had declined as a result of various state and local COVID-related restrictions during the three months ended June 30, 2020. We saw an increase in demand as pet parents began to travel again and return to the office, as some COVID-related restrictions lifted during the three months ended June 30, 2021, along with our service mix shifting back to higher average order value overnight services.

Revenue increased $14.3 million, or 64%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase in revenue was primarily due to a 36% increase in the number of bookings on our platform as well as a 22% increase in the average gross booking value per booking. Demand for overnight and daytime pet care is primarily linked to pet parents traveling or working outside of the home which had declined as a result of various state and local COVID-related restrictions during the six months ended June 30, 2020. As those restrictions began to lift in the six months ended June 30, 2021, our mix is shifting back to higher average order value overnight services as pet parents begin to travel again and return to the office.

Costs and Expenses

	Three Months Ended June 30,							Six Months Ended June 30,
	2020		2021		% Change			2020		2021		% Change
	(in thousands, except for percentages)
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	$	6,209	$	6,283		1	%	$	11,627	$	10,459		(10	)%
Operations and support		2,482		3,482		40			7,537		5,715		(24	)
Marketing		2,146		4,462		108			11,496		7,128		(38	)
Product development		4,927		5,086		3			13,738		9,554		(30	)
General and administrative		4,601		5,732		25			10,803		12,368		14
Depreciation and amortization		2,100		1,849		(12	)		4,862		3,699		(24	)
Total costs and expenses	$	22,465	$	26,894		20	%	$	60,063	$	48,923		(19	)%

Cost of Revenue (Exclusive of Depreciation and Amortization Shown Separately). Cost of revenue (exclusive of depreciation and amortization shown separately) increased $0.1 million, or 1%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a 355% increase in revenue as the business continues to recover from the COVID-19 pandemic. The increase includes a $2.2 million increase in merchant fees, a $0.2 million increase in pet care provider background check costs, and a $0.2 million increase in customer claim costs related to the Rover Guarantee. Additionally, these increases were partially offset by a $2.8 million decline in internal-use software amortization as the three months ended June 30, 2020 included $2.6 million in accelerated amortization of internal-use software due to the discontinuation of our on-demand service.

Cost of revenue (exclusive of depreciation and amortization shown separately) decreased $1.2 million, or 10%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease includes a $2.9 million decrease in amortization of internal-use software primarily due to the acceleration of amortization related to the discontinuation of our on-demand service, partially offset by a $1.8 million increase in merchant fees.

Operations and Support. Operations and support expenses increased $1.0 million, or 40%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $0.4 million increase in personnel-related costs for the operations and support team as well as a $0.6 million increase in third-party costs related to outsourced support providers in response to changes in demand for our platform as illustrated by the 220% increase in the number of bookings on our platform due to the business recovering from the COVID-19 pandemic and the increased need for pet sitter provider onboarding and general platform user support activities.

Operations and support expenses decreased $1.8 million, or 24%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease was primarily due to a decrease in personnel-related costs for the operations and support team, inclusive of $0.5 million of severance costs related to the reduction in our workforce in response to the impact of the COVID-19 pandemic in March 2020.

Marketing. Marketing expenses increased $2.3 million, or 108%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase in marketing expenses was primarily the result of an increase in general marketing spend in response to increasing demand for Rover platform services and the business recovering from the COVID-19 pandemic.

Marketing expenses decreased $4.4 million, or 38%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease in marketing expenses was the result of a $3.2 million reduction in discretionary marketing spend and professional services costs. These reductions were made to reduce cash outlays due to a 43% reduction in the number of bookings on our platform as a result of the COVID-19 pandemic. Additionally,

personnel costs decreased by $0.9 million driven by the reduction in our workforce in March 2020, inclusive of $0.3 million of severance costs.

Product Development. Product development expenses increased $0.2 million, or 3%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily the result of an increase in personnel expenses due to increased headcount as we reinvest in technology as our business recovers from the COVID-19 pandemic.

Product development expenses decreased $4.2 million, or 30%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease was primarily the result of a $3.7 million decrease in personnel expenses as a result of the reduction in our workforce in March 2020, inclusive of $1.3 million of severance costs and a $0.5 million decline in the capitalization of internal use software, and a $0.3 million decrease in professional service costs.

General and Administrative. General and administrative expenses increased $1.1 million, or 25%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase in general and administrative expenses was primarily the result of an increase in personnel expenses due to the return to a normalized compensation structure with annual compensation increases as compared to the three months ended June 30, 2020, which included COVID-19 related compensation reductions.

General and administrative expenses increased $1.6 million, or 14%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase in general and administrative expenses was the result of $0.9 million of professional services related to our public company readiness efforts, as well as a $1.0 million increase in personnel expenses due to the return to a normalized compensation structure with annual compensation increases as compared to the six months ended June 30, 2020, which included COVID-19 related compensation reductions. These increases were partially offset by a $0.3 million decrease in severance costs.

Depreciation and Amortization. Depreciation and amortization decreased $0.3 million, or 12%, in the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The decrease in depreciation and amortization expenses was due to a decrease in intangible asset amortization expense as a result of certain intangible assets related to the DogVacay and Barking Dog Ventures acquisitions reaching the end of their useful lives.

Depreciation and amortization decreased $1.2 million, or 24%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease in depreciation and amortization expenses was due to a decrease in intangible asset amortization expense as a result of certain intangible assets related to the DogVacay and Barking Dog Ventures acquisitions reaching the end of their useful lives.

Other Income (Expense), Net

Interest Income. The $0.1 million decrease in interest income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily due to decrease in interest earning balances.

The $0.4 million decrease in interest income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily related to a decline in interest rates year over year, partially offset by an increase in cash balances as we had fully drawn on our credit facility and received a PPP loan in March and April 2020, respectively.

Interest Expense. The $0.3 million decrease in interest expense for three months ended June 30, 2021 compared to the three months ended June 30, 2020 was driven by the repayment of the variable rate revolving line of credit and variable rate growth capital advance components of the credit facility in August 2020 that was initially drawn in March of 2020. As of June 30, 2021, we had both the Subordinated credit facility and Paycheck Protection loan outstanding as well as $11.4 million available under the revolving borrowings. In connection with the closing of the Merger on July 30, 2021, we repaid the principal and accrued interest on the Subordinated credit facility and PPP Loan.

The $0.1 million decrease in interest expense for six months ended June 30, 2021 compared to the six months ended June 30, 2020 was driven by the repayment of the variable rate revolving line of credit and variable rate growth capital advance components of the credit facility in August 2020 that was initially drawn in March of 2020. As of June 30, 2021, we had both the Subordinated credit facility and Paycheck Protection loan outstanding as well as $11.4 million available under the revolving borrowings. In connection with the closing of the Merger on July 30, 2021, we repaid the principal and accrued interest on the Subordinated credit facility and PPP Loan.

Key Business Metrics and Non-GAAP Measures

In addition to the measures presented in our consolidated financial statements, we use the following metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions.

Bookings

We define a booking as a single arrangement, prior to cancellation, between a pet parent and pet care provider, which can be for a single night or multiple nights for our overnight services, or for a single walk/day/drop-in/groom or multiple walks/days/drop-ins for our daytime services. We believe that the number of bookings is a useful indicator of the scale of our marketplace. We define new bookings as the total number of first-time bookings that new users, which Rover refers to as pet parents, book on our platform in a period. We define repeat bookings as the total number of bookings from pet parents who have had a previous booking on Rover.

Our bookings are impacted by seasonal trends. We typically experience stronger bookings during the months of June, July, and August, and November and December, which in a typical year, coincide with high travel demand related to summer vacation and holiday travel. This seasonality impacts bookings, Gross Booking Value, revenue, marketing and operations and support expenses. Bookings can also be impacted by the timing of holidays and other events.

In the second quarter of 2021, we had 1.1 million bookings, a 220% increase from the same period in 2020. This was our largest new customer quarter ever, surpassing the previous high achieved in the third quarter of 2019 by 16%, driven disproportionately by organic customer acquisition channels. The improvement in bookings was driven by the ongoing recovery in travel demand from the impacts of COVID-19 during the second quarter. See “—Impact of COVID-19.”

Gross Booking Value (“GBV”)

Gross Booking Value, or GBV, represents the dollar value of bookings on our platform in a period and is inclusive of pet care provider earnings, service fees, add-ons, taxes and alterations that occurred during that period. We believe that GBV is a useful indicator of the level of spending on and growth of our platform. Growth in GBV represents increasing activity on our platform from repeat and new pet parents and may differ slightly from bookings growth depending on the mix of daytime and overnight services for each period.

In the second quarter of 2021, our GBV was $134.1 million, a 309% increase from $32.8 million in the same prior year period. Demand for services grew throughout the three months ending June 30, 2021, with GBV for the period growing 18% over the same period in 2019. The increase in our GBV was primarily due to continued increase in U.S. domestic travel demand. Similar to Bookings, this improvement was largely driven by stronger results in the U.S., as our international markets remained slower to recover. For additional information regarding the impact of the COVID-19 pandemic on our business, see “—Impact of COVID-19”.

Adjusted EBITDA

We collect and analyze operating and financial data to evaluate the health of our business and assess our performance. In addition to revenue, net income (loss), loss from operations, and other results under GAAP, we use Adjusted EBITDA, which is described below, to evaluate our business.

We use this non-GAAP financial measure for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that this non-GAAP financial measure, when taken together with its most directly comparable GAAP measure, net income (loss), provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our recurring core business operating results.

We believe that both management and investors benefit from referring to this non-GAAP financial measure in assessing our performance and when planning, forecasting, and analyzing future periods. This non-GAAP financial measure also facilitates management’s internal comparisons to our historical performance. We believe this non-GAAP financial measure is useful to investors both because (1) it allows for greater transparency with respect to key

metrics used by management in its financial and operational decision-making and (2) it is used by our institutional investors and the analyst community to help them analyze the health of our business. Accordingly, we believe that this non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors.

Non-GAAP financial measures have limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for, financial information prepared in accordance with GAAP. For example, our calculation of Adjusted EBITDA may differ from similarly titled non-GAAP measures, if any, reported by our peer companies, or our peer companies may use other measures to calculate their financial performance, and therefore our use of Adjusted EBITDA may not be directly comparable to similarly titled measures of other companies. The principal limitation of Adjusted EBITDA is that it excludes significant expenses and income that are required by GAAP to be recorded in our financial statements. In addition, it is subject to inherent limitations as it reflects the exercise of judgments by management about which expense and income are excluded or included in determining this non-GAAP financial measure. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. In addition, such financial information is unaudited and does not conform to SEC Regulation S-X and as a result such information may be presented differently in our future filings with the SEC.

We define Adjusted EBITDA as net loss excluding depreciation and amortization, stock-based compensation expense, income tax expense or benefit, interest expense, interest income, other income (expense), net, and non-routine items such as restructuring, impairment, and certain acquisition and merger-related costs.

For the three months ended June 30, 2021, Adjusted EBITDA was $2.5 million, marking our first quarterly Adjusted EBITDA profit. The second quarter result was an improvement of $10.9 million compared to the second quarter of 2020. This was the result of strong revenue performance and high volume of organic new customer acquisition in addition to a lower cost structure because of the restructuring in 2020. Over the long term, we expect Adjusted EBITDA to continue to be positive and increase as a result of growth in bookings on our platform and operational efficiency gains; however, in the near term there remains some level of uncertainty as our marketplace continues to recover from the impact of COVID-19. For additional information regarding the impact of the COVID-19 pandemic on our business, see “—Impact of COVID-19”.

The following table presents a reconciliation of Adjusted EBITDA from net loss for the three and six months ended June 30, 2020 and 2021:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2021			2020			2021
	(in thousands)
Adjusted EBITDA reconciliation:
Net loss	$	(18,079	)	$	(2,806	)	$	(38,624	)	$	(13,397	)
Add (deduct):
Depreciation and amortization⁽¹⁾		6,599			3,608			11,243			7,177
Stock-based compensation⁽²⁾		894			1,147			2,479			2,148
Interest income		(129	)		(4	)		(461	)		(8	)
Interest expense		1,009			703			1,258			1,400
Other expense, net		144			26			188			77
Benefit from income taxes		(29	)		(331	)		(52	)		(317	)
Restructuring expense⁽³⁾		1,159			—			3,239			—
Acquisition-related costs⁽⁴⁾		3			151			31			1,056
Adjusted EBITDA	$	(8,429	)	$	2,494		$	(20,699	)	$	(1,864	)

______________

(1)	Depreciation and amortization include amortization expense related to capitalized internal use software, which is recognized as cost of revenue (exclusive of depreciation and amortization shown separately) in the consolidated statements of operations.

(2)	Stock-based compensation expense includes equity granted to employees as well as for professional services to non-employees.

(3)	Restructuring costs include expenses for severance-related and legal costs incurred during the implementation of our restructuring plan.

(4)	Acquisition and merger-related costs include accounting, legal, consulting and travel related expenses incurred in connection with business combinations.

Liquidity and Capital Resources

As of June 30, 2021, we had $103.4 million of cash and cash equivalents, which were primarily invested in money market funds.

From inception to December 31, 2020, we incurred operating losses and negative operating cash flows, and financed our operations through the sale of equity securities and the incurrence of debt. For the six months ended June 30, 2021, we incurred operating losses of $12.2 million but generated positive operating cash flows of $25.8 million. We expect that operating losses could continue into the foreseeable future as we continue to invest in growing our business. Based upon our current operating plans, we believe that cash and equivalents will be sufficient to fund our operations for at least the next 12 months from the date of this Form 8-K/A. However, these forecasts involve risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.

Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to our ability to grow our revenues, the impact of the COVID-19 pandemic, and our response to business challenges, including the need to develop new platform features and services or enhance our existing platform, improve our operating infrastructure, or acquire complementary businesses and technologies. We may seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations could be adversely affected.

Credit Facility

In May 2018, Rover entered into a credit facility with Silicon Valley Bank (“SVB”) consisting of a revolver and term loan borrowings. Our obligations under the credit facility are secured by substantially all of our assets. The credit facility contains customary conditions to borrowing, events of default and covenants restricting our activities,

including limitations on our ability to sell assets, engage in mergers and acquisitions, enter into transactions involving related parties, incur indebtedness or grant liens or negative pledges on our assets, make loans or make other investments. The credit facility also contains minimum liquidity and minimum net revenue financial covenants that are applicable if our overall liquidity does not exceed $75.0 million at the end of a reporting period. We were in compliance with all of our covenants under the credit facility as of June 30, 2021. In March 2021, the credit facility was amended to provide that the minimum liquidity and minimum net revenue financial covenants would be applicable if overall liquidity does not exceed $65.0 million at the end of the reporting period.

The revolving line of credit provides for up to $15.0 million principal amount of borrowings and matures in May 2022. Interest is payable monthly and accrues at the greater of (1) 4.5% and (2) prime rate plus a margin of 0.50% per year, or if certain milestones are achieved, greater of (1) 4.0% and (2) the prime rate. As of June 30, 2021, these milestones have not been met. We are required to pay a quarterly fee in an amount equal to 0.30% per year times the average unused portion of the revolving line credit. During the year ended December 31, 2020, we had incurred $11.4 million in revolver borrowings, issued a $3.5 million letter of credit primarily for the security deposit on our Seattle headquarters, which reduced available revolver borrowings, and repaid the $11.4 million revolver borrowings. We had $11.4 million in available revolver borrowings as of June 30, 2021.

The credit facility also provides for up to $15.0 million principal amount of term borrowings, available until June 30, 2021 which may be incurred in three tranches of up to $5.0 million based upon achievement of revenue milestones. Term borrowings mature in June 2024. Interest is payable monthly and accrues at the greater of (1) 5.0% and (2) prime rate plus a margin of 1.0% per year, or if certain milestones are achieved, greater of (1) 4.5% and (2) the prime rate plus a margin of 0.5% per year. As of June 30, 2021, these milestones have not been met. Term borrowings are interest only through June 2021. Beginning in July 2021 and continuing through the maturity date, principal and interest are payable in equal monthly installments. Principal that has been repaid cannot be reborrowed. During the year ended December 31, 2020, we had incurred $15.0 million in borrowings and repaid the $15.0 million term borrowings. As of June 30, 2021, no amounts were outstanding, and the Company can no longer borrow under the term borrowings component of the credit facility.

Subordinated Credit Facility

In August 2019, we entered into a subordinated credit facility with SVB and another lender which provides for up to $30.0 million principal amount of term borrowings until June 30, 2020 in tranches of at least $5.0 million. The subordinated credit facility matures in August 2022. Interest is payable monthly and accrues at a rate equal to the prime rate plus a margin of 4.25% per year. Borrowings are interest only through the maturity date when the outstanding principal amount and accrued interest must be repaid. The principal amount may be repaid at any time with a premium. Principal that has been repaid cannot be reborrowed. Our obligations under the subordinated credit facility are secured by substantially all of our assets. The subordinated credit facility contains customary conditions to borrowing, events of default and restrictive covenants that are substantially similar to our credit facility. As of June 30, 2021, we were in compliance with all of our covenants under the subordinated credit facility and had drawn the full $30.0 million of available borrowings. In connection with the closing of the Merger on July 30, 2021, we repaid the principal and accrued interest on the subordinated credit facility.

Paycheck Protection Program Loan

In April 2020, we entered into a Paycheck Protection Program Promissory Note and Agreement with SVB, pursuant to which we incurred $8.1 million aggregate principal amount of term borrowings (the “PPP Loan”). The PPP Loan was made under, and was subject to the terms and conditions of, the PPP which was established under the CARES Act and is administered by the U.S. Small Business Administration. The term of the PPP Loan was two years with a maturity date of April 2022 and accrues interest at a rate of 1.00% per year. Interest is payable monthly. Payments of principal and interest on the PPP Loan were deferred for the first 16 months of the term of the PPP Loan until August 2021.

In connection with the closing of the Merger on July 30, 2021, we repaid the principal and accrued interest on the PPP Loan.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Six Months Ended June 30,
	2020			2021
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(46,901	)	$	25,766
Investing activities		2,487			(3,362	)
Financing activities		64,652			130
Effect of foreign exchange on cash, cash equivalents, and restricted cash		22			4
Net increase in cash, cash equivalents, and restricted cash	$	20,260		$	22,538

Operating Activities

Net cash provided by operating activities was $25.8 million for the six months ended June 30, 2021. The most significant component of our cash provided by operations was a net loss of $13.4 million which included non-cash expense related to depreciation and amortization totaling $7.2 million, stock-based compensation of $2.1 million and $1.0 million of non-cash operating lease costs. This was offset by an increase in operating assets and liabilities, primarily as a result of an increase of $35.9 million in deferred revenue, pet parent deposits, and pet service provider liabilities due to increased payments received from customers in advance of revenue recognition as the business recovers from the COVID-19 pandemic.

Net cash used in operating activities was $46.9 million for the six months ended June 30, 2020. The most significant component of our cash used in operations was a net loss of $38.6 million. This included non-cash expense related to depreciation and amortization of $11.2 million and stock-based compensation of $2.5 million. In addition, cash outflow totaling $22.4 million was attributable to changes in operating assets and liabilities, primarily as a result of a $15.3 million decrease in deferred revenue, pet parent deposits and pet service provider liabilities due to the impact of the COVID-19 pandemic.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2021 was $3.4 million, which was primarily driven by our investment in internal-use software of $3.0 million and purchase of property and equipment of $0.4 million.

Net cash provided by investing activities for the six months ended June 30, 2020 was $2.5 million, which was primarily due to net short-term investment cash inflows of $6.9 million, offset by investment in internal-use software of $4.0 million and purchases of property and equipment of $0.5 million.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2021 was $0.1 million which consisted of $1.5 million of proceeds from exercises of common stock options offset by $1.4 million of payment of deferred transaction costs.

Net cash provided by financing activities for the six months ended June 30, 2020 was $64.7 million, which was primarily due to net proceeds from borrowings under our credit facilities.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of markets and other risks including the effects of change in interest rates, inflation and foreign currency translation and transaction risks as well as risks to the availability of funding sources, hazard events and specific asset risks.

Interest Rate Risk

Our investment portfolio consists of short-term fixed income securities, including government and investment-grade debt securities and money market funds. These securities are classified as available-for-sale and, consequently, are recorded in the condensed consolidated balance sheets at fair value with unrealized gains or losses, net of tax reported as a separate component of stockholders’ deficit within accumulated other comprehensive income (loss). Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investments for trading or speculative purposes.

Based on our investment portfolio balance as of December 31, 2020 and June 30, 2021, a hypothetical 100 basis point increase in interest rates would not have materially affected our condensed consolidated financial statements. We currently do not hedge these interest rate exposures.

Foreign Currency Risk

Our functional currency is the U.S. dollar, while certain of our current and future subsidiaries will be expected to have other functional currencies, including the British Pound, the Euro and the Canadian dollar. To date, we have not had material exposure to foreign currency fluctuations and have not hedged such exposure, although it may do so in the future.

Inflation Risk

We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While our significant accounting policies are described in the notes to our condensed consolidated financial statements, we believe that the accounting policies below are most critical to understanding our financial condition and historical and future results of operations.

Revenue Recognition

We recognize revenue in accordance with ASC Topic 606, which we adopted as of January 1, 2019 on a modified retrospective basis. We generate substantially all of our revenue from facilitating the connection between pet care providers and pet parents. We consider both pet parents and pet care providers to be our customers. We charge a fixed

percentage service fee for each arrangement of pet-related services between the pet parent and the pet service provider on our platform, or a booking. The fixed percentage service fees are established at the time a pet parent or pet provider joined the platform and do not vary based on the volume of transactions. A booking defines the explicit fee from which we earn our fixed service fee. Our single performance obligation is identified as the facilitation of the connection between pet care provider and pet parent through our platform, which occurs upon the completion of a booking. Revenue is recognized at a point in time when the performance obligation is satisfied upon completion of a booking and the related underlying pet-related services have begun.

We evaluate the presentation of revenue on a gross or net basis based on whether or not we are the principal in the transaction (gross) or whether we arrange for other parties to provide the service to the pet parent and are an agent (net) in the transaction. We determined that we do not control the right to use the pet-related services provided by the pet service provider to the pet parent. Accordingly, we concluded that we are acting in an agent capacity and revenue is presented net reflecting the service fees received from our customers to facilitate a booking.

We offer discounts to pet parents to encourage use of the Company’s platform. Discounts are primarily in the form of coupon codes for prospective pet parents and are accounted for as reductions to revenue.

Stock-Based Compensation

We estimate the fair value of stock options granted to employees, non-employees and directors using the Black-Scholes option pricing model. The fair value of stock options that is expected to vest is recognized as compensation expense on a straight-line basis over the requisite service period.

The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:

•	Fair Value of Common Stock. See “—Common Stock Valuations” below.

•	Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

•	Expected Volatility. As our stock was not publicly traded through June 30, 2021, the expected volatility was estimated based on the average volatility for comparable publicly traded peer companies over a period equal to the expected term of the stock option grants.

•

Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), as we do not have sufficient historical data to use any other method to estimate expected term.

•	Expected Dividend Yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

See Note 14 to our annual audited financial statements beginning on page F-34 of the Proxy Statement for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, stock-based compensation could be materially different.

Common Stock Valuations

Historically, for all periods prior to Merger, since there has been no public market of our common stock, the fair value of the shares of common stock underlying our share-based awards was estimated on each grant date by our Board. To determine the fair value of our common stock underlying option grants, our Board considered, among other things, input from management, valuations of our common stock prepared by unrelated third-party valuation firms in

accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, and the Board’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors include, but are not limited to:

•	our results of operations and financial position, including the present value of expected future cash flows and the value of tangible and intangible assets;

•	risks and opportunities relevant to our business;

•	the status of platform development activities;

•	our business conditions and projections;

•	the market value of companies engaged in a substantially similar business;

•	the lack of marketability of our common stock as a private company;

•	the prices at which we sold shares of our convertible preferred stock to outside investors in arms-length transactions;

•	the rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;

•	the likelihood of achieving a liquidity event for our securityholders, such as an initial public offering or a sale of the company, given prevailing market conditions;

•	the hiring of key personnel and the experience of management; and

•	trends and developments in our industry, including the impact of COVID-19.

For valuations performed prior to October 31, 2020, we used the option pricing method (“OPM”) back-solve method. In an OPM framework, the back-solve method for inferring the equity value implied by a recent financing transaction involves making assumptions for the expected time to liquidity, volatility and risk-free rate and then solving for the value of equity such that value for the most recent financing equals the amount paid. This method was selected due to our stage and uncertainty regarding the timing and probability of possible future exit scenarios.

For valuations performed on and subsequent to October 31, 2020, we used a hybrid method of the OPM and the Probability-Weighted Expected Return Method (“PWERM”). PWERM considers various potential liquidity outcomes. Our approach included the use of an initial public offering scenario, a strategic merger or sale scenario, and a scenario assuming continued operation as a private entity. Under the hybrid OPM and PWERM method, the per share value calculated under the OPM and PWERM are weighted based on expected exit outcomes and the quality of the information specific to each allocation methodology to arrive at a final estimated fair value per share of the common stock before a discount for lack of marketability is applied.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included as Exhibit 99.1 to this Form 8-K/A for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent it has made one, of their potential impact on our financial condition and its results of operations.

Internal Control Over Financial Reporting

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

In connection with the preparation of our consolidated financial statements as of and for the years ended December 31, 2018, 2019 and 2020, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We did not design or maintain an effective control environment due to an insufficient complement of personnel with the appropriate level of knowledge, experience, and training commensurate with our accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:

•

We did not design and maintain sufficient formal procedures and controls to achieve complete and accurate financial reporting and disclosures, including controls over the preparation and review of journal entries and account reconciliations. Additionally, we did not design and maintain controls to ensure appropriate segregation of duties.

Neither of these material weaknesses resulted in a material misstatement to the consolidated financial statements, however they did result in adjustments to several accounts and disclosures. Additionally, these material weaknesses could result in a misstatement of substantially all of the financial statement accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

•

We identified an additional material weakness as a result of the material weakness in our control environment in that we did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (1) program change management controls for financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (2) user access controls to ensure appropriate segregation of duties that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; (3) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored; and (4) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT deficiencies did not result in a material misstatement to the financial statements, however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, we have determined these deficiencies in the aggregate constitute a material weakness.

Rover has begun implementation of a plan to remediate these material weaknesses. These remediation measures are ongoing and include hiring additional personnel and implementing additional procedures and controls. While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting.

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Unless otherwise indicated or the context otherwise requires, references to: (a) “Rover Group, Inc.” or “New Rover” refers to Caravel and its consolidated subsidiaries after giving effect to the Merger, (b) “Legacy Rover” refers to A Place for Rover, Inc., a Delaware corporation, prior to the Closing and (c) “Caravel” refers to Nebula Caravel Acquisition Corp., a Delaware corporation, prior to the Closing. Capitalized terms used but not defined in this Exhibit 99.3 shall have the meanings ascribed to them in the Current Report on Form 8-K (“Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”) on August 5, 2021 and, if not defined in the Form 8-K, capitalized terms used but not defined in this Exhibit 99.3 shall have the meanings ascribed to them in the proxy statement/prospectus filed by Caravel with the SEC on July 9, 2021 (the “Proxy Statement”).

Rover Group, Inc. is providing the following unaudited pro forma condensed combined financial information to aid in the analysis of the financial aspects of the Merger and other events contemplated by the Business Combination Agreement. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Caravel and Legacy Rover, adjusted to give effect to the Merger and other events contemplated by the Business Combination Agreement. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the historical unaudited condensed balance sheet of Caravel with the historical unaudited condensed consolidated balance sheet of Legacy Rover on a pro forma basis as if the Merger and the other events contemplated by the Business Combination Agreement, summarized below, had been consummated on June 30, 2021. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 combines the historical unaudited condensed statement of operations of Caravel for the six months ended June 30, 2021 and the historical unaudited condensed consolidated statement of operations of Legacy Rover for the six months ended June 30, 2021, giving effect to the transaction as if the Merger and other events contemplated by the Business Combination Agreement had been consummated on January 1, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines the historical audited statement of operations of Caravel for the period from September 18, 2020 (inception) through December 31, 2020, as restated, with the historical audited consolidated statement of operations of Legacy Rover for the year ended December 31, 2020, giving effect to the transaction as if the Merger and other events contemplated by the Business Combination Agreement had been consummated on January 1, 2020. In addition, the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 give effect to the repayment of Legacy Rover’s PPP Loan and Subordinated Credit Facility which occurred in connection with the Merger.

The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and the accompanying notes:

•

the (a) historical audited financial statements of Caravel as of December 31, 2020 and for the period from September 18, 2020 (inception) through December 31, 2020, as restated, included in Caravel’s amended Annual Report on Form 10-K filed with the SEC on May 7, 2021 and incorporated by reference and (b) historical unaudited condensed financial statements of Caravel as of and for the six months ended June 30, 2021 included in Rover Group, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on August 16, 2021 and incorporated by reference;

•

the (a) historical audited consolidated financial statements of Legacy Rover as of and for the year ended December 31, 2020 included in the Proxy Statement beginning on page F-2 and (b) historical unaudited condensed consolidated financial statements of Legacy Rover as of and for the six months ended June 30, 2021 included as Exhibit 99.1 to this Amendment No. 1 to Current Report on Form 8-K/A and are incorporated herein by reference.

•

other information relating to Caravel and Legacy Rover included in the Proxy Statement, including the Business Combination Agreement and the description of certain terms thereof set forth under the section titled “Proposal No. 1—The Business Combination Agreement” beginning on page 112 of the Proxy Statement and incorporated herein by reference.

The unaudited pro forma condensed combined financial information should also be read together with “Caravel Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 254 of the Proxy Statement, “Rover Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 207 of the Proxy Statement, “Rover Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Exhibit 99.2 to this Amendment No. 1 to Current Report on Form 8-K/A filing and other financial information included in the Proxy Statement and incorporated herein by reference.

Description of the Merger

Pursuant to the Business Combination Agreement, Merger Sub merged with and into Legacy Rover, with Legacy Rover surviving the Merger. Legacy Rover became a wholly-owned subsidiary of Caravel and Caravel was renamed “Rover Group, Inc.” (hereafter referred to as New Rover). Upon the consummation of the Merger, each share of Legacy Rover common stock and Legacy Rover preferred stock converted into shares of New Rover Class A Common Stock and a contingent non-assignable right to receive additional shares of New Rover Class A Common Stock. Each share of Legacy Rover common stock and Legacy Rover preferred stock received a deemed value of $10.379 per share after giving effect to the exchange ratio of 1.0379 based on the terms of the Business Combination Agreement. Upon the consummation of the Merger, no cash consideration was paid out to Legacy Rover stockholders as there was insufficient cash after Caravel common stockholders exercised their right to redeem shares for cash. Upon the consummation of the Merger, all outstanding Legacy Rover Warrants were net exercised. Accordingly, 124,477,819 shares of New Rover Class A Common Stock were issued and outstanding, and 20,412,603 shares were reserved for the potential future issuance of New Rover Class A Common Stock upon the exercise of New Rover stock options. The Merger resulted in the following transactions as contemplated by the Business Combination Agreement:

•	the conversion of all outstanding shares of Legacy Rover redeemable convertible preferred stock into shares of Legacy Rover common stock at the then-effective conversion rate as calculated pursuant to Legacy Rover’s certificate of incorporation;

•

the cancellation of each issued and outstanding share of Legacy Rover common stock (including shares of Legacy Rover common stock resulting from the conversion of Legacy Rover redeemable convertible preferred stock) and the conversion into a number of shares of New Rover Common Stock equal to the exchange ratio of 1.0379; and

•

the conversion of all outstanding vested and unvested Legacy Rover Options into New Rover Options exercisable for shares of New Rover Common Stock with the same terms except for the number of shares exercisable and the exercise price, each of which was adjusted using the exchange ratio of 1.2006 for Legacy Rover Options.

Other Related Events in Connection with the Merger

Other events that took place in connection with the Merger are summarized below:

•	Issuance and sale of 5,000,000 New Rover Class A Common Stock at a purchase price of $10.00 per share pursuant to the PIPE Investment.

•

Issuance and sale of 8,000,000 New Rover Class A Common Stock at a purchase price of $10.00 per share pursuant to the Sponsor Backstop Subscription Agreement and the issuance and sale of 1,000,000 New Rover Class A Common Stock at a purchase price of $10.00 per share pursuant to an assignment and assumption agreement entered into between Broad Bay, TWC Funds, and Caravel on July 26, 2021 (the “Assignment Agreement”).

•

Immediately before the Merger, the Legacy Rover chief executive officer (the “CEO”) net exercised 1.8 million outstanding Legacy Rover Options. 0.7 million shares were withheld to cover the tax withholding and remittance obligations of Legacy Rover of $6.8 million. The net exercise of outstanding Legacy Rover Options by the CEO was contingent on the Merger closing.

•	Repayment of $8.2 million and $30.2 million in principal and accrued interest to settle amounts outstanding under Legacy Rover’s PPP Loan and Subordinated Credit Facility, respectively, following the Closing.

•	Payment of direct and incremental transaction fees of $35.2 million for underwriting/banking, legal, accounting and other fees.

Earnout Shares

Legacy Rover stockholders (including Legacy Rover Option holders) are entitled to receive up to an additional 22,500,000 shares of New Rover Class A Common Stock. The 22,500,000 shares are comprised of 19,734,183 shares to be issued to the Legacy Rover common stockholders (“Earnout Shares”) that are released upon certain triggering events and 2,765,817 shares (“Additional Earnout Shares”) that are included in the option exchange ratio and are not subject to triggering events after the closing of the Merger. The triggering events that will result in the issuance of the Earnout Shares during the Earnout Period are the following:

•

8,770,748 shares will be earned if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $12.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

8,770,748 shares will be earned if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $14.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

2,192,687 shares will be earned if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $16.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

If, during the Earnout Period, there is a change of control transaction, then all remaining triggering events that have not previously occurred shall be deemed to have occurred and a total of 19,734,183 shares will be issued to Legacy Rover equity holders to participate in the change of control transaction.

Founder Shares held by Sponsor

During September 2020, the Sponsor subscribed to purchase 7,906,250 shares of Caravel Class B Common Stock for an aggregate price of $25,000. 718,750 shares of Caravel Class B Common Stock were cancelled during November 2020 and 312,500 were cancelled during December 2020 due to the Caravel IPO underwriters partially exercising the over-allotment option, resulting in an aggregate of 6,875,000 Founder Shares outstanding prior to the closing of the Merger. As a result of the Merger, the Founder Shares were modified and 3,437,500 Founder Shares vested as part of the Sponsor Backstop Subscription Agreement and 975,873 Founder Shares were forfeited. The remaining unvested Founder Shares of 2,461,627 will remain restricted until vesting upon the occurrence of certain triggering events through the Earnout Period. The remaining unvested Founder Shares will vest based on the following events:

•

984,651 shares will vest if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $12.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

984,651 shares will vest if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $14.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

492,325 shares will vest if the volume weighted average price of New Rover Class A Common Stock is greater than or equal to $16.00 over any twenty trading days within any thirty trading day period during the Earnout Period.

•

If during the Earnout Period, there is a change of control transaction, then immediately prior to the consummation of the change of control transaction the following will occur: (i) any triggering event that has not previously occurred shall be deemed to have occurred and (ii) all unvested Founder Shares will vest and be eligible to participate in the change of control transaction.

Expected Accounting Treatment for the Merger

The Merger will be accounted for as a reverse recapitalization under GAAP because Legacy Rover has been determined to be the accounting acquirer under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). Under this method of accounting, Caravel will be treated as the “acquired” company for financial reporting purposes. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Rover will become the historical financial statements of New Rover, and Caravel’s

assets, liabilities and results of operations will be consolidated with Legacy Rover’s beginning on the acquisition date. For accounting purposes, the financial statements of New Rover will represent a continuation of the financial statements of Legacy Rover with the Merger being treated as the equivalent of Legacy Rover issuing stock for the net assets of Caravel, accompanied by a recapitalization. The net assets of Caravel will be stated at historical costs and no goodwill or other intangible assets will be recorded. Operations prior to the Merger will be presented as those of Legacy Rover in future reports of New Rover.

Legacy Rover was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

•

Legacy Rover stockholders comprising a relative majority of the voting power of New Rover;

•

Legacy Rover will have the ability to nominate a majority of the members of the board of directors of New Rover;

•

Legacy Rover’s operations prior to the acquisition comprising the only ongoing operations of New Rover;

•

Legacy Rover’s senior management comprising a majority of the senior management of New Rover; and

•

New Rover substantially assuming the Legacy Rover name.

Legacy Rover is in process of assessing the accounting related to the Merger and the treatment related to the Earnout Shares and Founder Shares. Legacy Rover is assessing whether the Earnout Shares and Founder Shares should be accounted for as liability classified equity instruments that are earned upon achieving the triggering events, which include events that are not indexed to the common stock of New Rover, and if the arrangements should be recorded as long term. If the Earnout Shares and Founder Shares are accounted for as a liability, then the liability will be recognized at fair value upon the Merger closing and remeasured in future reporting periods through the statement of operations. The Earnout Shares and Founder Shares have been treated as a liability in the unaudited pro forma condensed combined financial statements and the preliminary fair values have been determined using the most reliable information available.

Legacy Rover is in process of assessing the accounting related to the Merger and the treatment related to the Public Warrants and Private Placement Warrants. Legacy Rover is assessing whether the Public Warrants and Private Placement Warrants should be accounted for as equity or liability classified equity instruments after the closing of the Merger. The Public Warrants and Private Placement Warrants have continued to be treated as liability classified in the unaudited pro forma condensed combined financial statements.

Legacy Rover is in process of assessing the accounting related to the allocation of direct and incremental transaction costs between Caravel Common Stock, Public Warrants, Private Placement Warrants, and Earnout Shares. The transaction costs have been recorded within equity in the unaudited pro forma condensed combined financial statements. If direct and incremental transaction costs are allocated to liability classified equity instruments, then expense allocated to the liability classified equity instruments will be recognized upon the Merger closing.

Legacy Rover is in process of assessing the accounting related to the New Rover Options and whether the incremental 0.1645 exchange ratio (as compared to the exchange ratio to the New Rover Common stock) provided to Legacy Rover Option holders should be accounted for as a modification under ASC 718, Stock-Based Compensation. The unaudited pro forma condensed combined financial statements do not reflect any incremental expense related to the New Rover Options.

The final accounting related to the Merger, including the Earnout Shares, Founder Shares, Public Warrants, Private Placement Warrants, transaction costs, and stock option modifications will be finalized by New Rover and reported on in the first reporting period following the consummation of the Merger.

Basis of Pro Forma Presentation

The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X and reflects the adoption of Release No. 33-10786. The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an illustrative understanding of New Rover upon consummation of the Merger in accordance with GAAP. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial information are described in the accompanying notes.

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Merger occurred on the dates indicated, and do not reflect adjustments for any anticipated synergies, operating efficiencies, tax savings or cost savings. The proceeds remaining after the payment of Caravel underwriter fees and payment of transaction costs related to the Merger are expected to be used for general corporate purposes. The unaudited pro forma condensed combined financial information does not purport to project the future operating results or financial position of New Rover following the completion of the Merger. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed. Caravel and Legacy Rover have not had any historical relationship prior to the transactions. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The unaudited pro forma condensed combined financial information contained herein reflects Caravel stockholders’ approval of the Merger on July 28, 2021, and that Caravel public stockholders holding 14,677,808 shares elected to redeem their shares prior to the Closing.

The following summarizes the New Rover Common Stock issued and outstanding immediately after the Merger:

	Shares		%
Former Caravel stockholders ⁽⁶⁾		12,822,192		8.2
Sponsor and related parties ^(1)(2)(7)		13,899,127		8.8
Former Legacy Rover stockholders ⁽³⁾⁽⁴⁾		124,477,819		79.2
Third party investors in PIPE Investment and Assignment Agreement ⁽⁵⁾		6,000,000		3.8
Total shares of New Rover Common Stock outstanding at closing of the Merger		157,199,138		100.0

(1)	Amount includes 8,000,000 shares of New Rover Common Stock the Sponsor purchased as part of the Sponsor Backstop Subscription Agreement for $80.0 million.

(2)	The Sponsor and related parties hold 2,461,627 Founder Shares that vest upon certain triggering events and are included in the outstanding total shares at the Merger closing. Upon the Merger closing, 3,437,500 Founder Shares vested and 975,873 Founder Shares were forfeited.

(3)	Amount excludes Legacy Rover Options converted to equivalent New Rover Options that are exercisable for 20,412,603 shares of New Rover Common Stock.

(4)

Following the closing of the Merger, the eligible Legacy Rover stockholders (including holders of Legacy Rover common stock and Legacy Rover preferred stock) have the right to receive up to 19,734,183 Earnout Shares in tranches upon the occurrence of the triggering events during the Earnout Period. Because the Earnout Shares are contingently issuable based upon the triggering events that have not yet been achieved, the New Rover Common Stock issued and outstanding immediately after the Merger excludes the 19,734,183 Earnout Shares.

(5)	Amount includes 5,000,000 shares of New Rover Common Stock subscribed for by PIPE Investors and 1,000,000 shares of New Rover Common Stock purchased as part of the Assignment Agreement for $10.0 million.

(6)

Amount excludes 5,500,000 outstanding Public Warrants issued in connection with the Caravel IPO as such securities are not exercisable until the later of (i) the date that is thirty (30) days after the first date on which the Company completes a merger, share exchange, asset acquisitions, share purchase, reorganization or similar transaction, involving the Company and one or more businesses and (ii) the date that is twelve (12) months from the date of the closing of the Caravel IPO.

(7)	Amount excludes 2,574,164 Private Placement Warrants held by the Sponsor. Prior to the Merger closing, there were 5,166,667 Private Placement Warrants issued and outstanding and 2,592,503 were forfeited upon the Merger closing.

The following unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 and for the six months ended June 30, 2021 are based on the historical financial statements of Caravel and Legacy Rover. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. If the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different and those changes could be material.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2021

(in thousands)

	June 30, 2021						Transaction
	Caravel (Historical)			Legacy Rover (Historical)			Accounting Adjustments (Note 2)				Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	31		$	103,386			275,034		A	$	299,404
								50,000		B
								(9,625	)	C
								(24,235	)	D
								(146,778	)	F
								90,000		G
								(38,409	)	O
Accounts receivable, net		—			12,187			—				12,187
Prepaid expenses and other current assets		571			2,782			—				3,353
Total current assets		602			118,355			195,987				314,944
Investments held in trust account		275,034			—			(275,034	)	A		—
Property and equipment, net		—			22,914			—				22,914
Operating lease right-of-use assets		—			21,876			—				21,876
Intangible assets, net		—			6,162			—				6,162
Goodwill		—			33,159			—				33,159
Deferred tax asset, net		—			1,574			—				1,574
Other noncurrent assets		—			4,955			(4,782	)	D		173
Total assets	$	275,636		$	208,995			(83,829	)		$	400,802
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	47		$	2,813			—			$	2,860
Accrued compensation and related expenses		—			4,381			6,757		P		11,138
Accrued expenses and other current liabilities		3,612			5,545			(3,430	)	D		5,441
								(286	)	O
Deferred revenue		—			8,167			—				8,167
Pet parent deposits		—			33,838			—				33,838
Pet service provider liabilities		—			8,680			—				8,680
Debt, current portion		—			7,746			(7,746	)	O		—
Operating lease liabilities, current portion		—			2,303			—				2,303
Total current liabilities		3,659			73,473			(4,705	)			72,427
Debt, net of current portion		—			29,969			(29,969	)	O		—
Operating lease liabilities, net of current portion		—			26,193			—				26,193
Earnout liabilities		—			—			202,889		H		228,081
								25,192		J
Other noncurrent liabilities		—			783			—				783
Deferred underwriting commissions in connection with the initial public offering		9,625			—			(9,625	)	C		—
Derivative warrant liabilities		30,885			—			(5,646	)	N		25,239
Total liabilities		44,169			130,418			178,136				352,723
Redeemable convertible preferred stock		—			290,427			(290,427	)	L		—
Caravel Class A Common Stock subject to redemption		226,467			—			(226,467	)	E		—
Stockholders' equity (deficit):
Legacy Rover common stock		—			—			—				—
Caravel preferred stock		—			—			—				—
New Rover Class A Common Stock		—			—			1		B		15
								2		E
								(1	)	F
								1		G
								9		L
								3		M
Caravel Class A Common Stock		—			—			—				—
Caravel Class B Common Stock		1			—			(1	)	I		—
Additional paid-in capital		25,316			57,542			49,999		B		317,864
								(25,587	)	D
								226,465		E
								(146,777	)	F
								89,999		G
								(202,889	)	H
								(37,777	)	I
								37,778		I
								(25,192	)	J
								(20,317	)	K
								290,418		L
								(3	)	M
								(6,757	)	P
								5,646		N
Accumulated other comprehensive income		—			282			—				282
Accumulated deficit		(20,317	)		(269,674	)		20,317		K		(270,082	)
								(408	)	O
Total stockholders’ equity (deficit)		5,000			(211,850	)		254,929				48,079
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	275,636		$	208,995			(83,829	)		$	400,802

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2020

(in thousands, except per share data)

	As Restated
	For the period from September 18, 2020 (inception)			For the year ended
	through December 31, 2020 Caravel (Historical)			December 31, 2020 Legacy Rover (Historical)			Transaction Accounting Adjustments (Note 2)			Pro Forma Combined
Revenue	$	—		$	48,800		$	—		$	48,800
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		—			19,823			—			19,823
Operations and support		—			12,371			—			12,371
Marketing		—			16,332			—			16,332
Product development		—			22,567			—			22,567
General and administrative		114			21,813			—			21,927
Depreciation and amortization		—			8,899			—			8,899
Total costs and expenses		114			101,805			—			101,919
Loss from operations		(114	)		(53,005	)		—			(53,119	)
Other income (expense), net:
Interest income		—			488			—			488
Interest expense		—			(3,154	)		2,203	R		(951	)
Loss from impairment of DogHero investment		—			(2,080	)		—			(2,080	)
Other income (expense), net		—			172			—			172
Financing cost- derivative warrant liabilities		(476	)		—			—			(476	)
Change in fair value of derivative warrant liabilities		(1,122	)		—			260	Q		(862	)
Total other income (expense), net		(1,598	)		(4,574	)		2,463			(3,709	)
Loss before income taxes		(1,712	)		(57,579	)		2,463			(56,828	)
Income tax benefit		—			94			—			94
Net loss	$	(1,712	)	$	(57,485	)	$	2,463		$	(56,734	)
Weighted average shares outstanding of New Rover Class A Common Stock - basic and diluted									S		150,968
Basic and diluted net loss per share - New Rover Class A Common Stock										$	(0.38	)
Weighted average shares outstanding of Legacy Rover common stock - basic and diluted					28,804
Basic and diluted net loss per share - Legacy Rover				$	(2.00	)
Weighted average shares outstanding of Caravel Class A Common Stock - basic and diluted		27,500
Basic and diluted net loss per share - Caravel Class A Common Stock	$	(0.00	)
Weighted average shares outstanding of Caravel Class B Common Stock - basic and diluted		6,375
Basic and diluted net loss per share - Caravel Class B Common Stock	$	(0.27	)

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2021

(in thousands, except per share data)

	For the six months			For the six months ended
	ended June 30, 2021 Caravel (Historical)			June 30, 2021 Legacy Rover (Historical)			Transaction Accounting Adjustments (Note 2)				Pro Forma Combined
Revenue	$	—		$	36,678		$	—			$	36,678
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		—			10,459			—				10,459
Operations and support		—			5,715			—				5,715
Marketing		—			7,128			—				7,128
Product development		—			9,554			—				9,554
General and administrative		4,658			12,368			—				17,026
Depreciation and amortization		—			3,699			—				3,699
Total costs and expenses		4,658			48,923			—				53,581
Loss from operations		(4,658	)		(12,245	)		—				(16,903	)
Other income (expense), net:
Interest income		—			8			—				8
Interest expense		—			(1,400	)		1,400		V		—
Other expense, net		—			(77	)		—				(77	)
Interest earned on investments held in Trust Account		34			—			(34	)	U		—
Change in fair value of derivative warrant liabilities		(13,980	)		—			4,200		T		(9,780	)
Total other income (expense), net		(13,946	)		(1,469	)		5,566				(9,849	)
Loss before income taxes		(18,604	)		(13,714	)		5,566				(26,752	)
Income tax expense		—			317			—				317
Net loss	$	(18,604	)	$	(13,397	)	$	5,566			$	(26,435	)
Weighted average shares outstanding of New Rover Class A Common Stock - basic and diluted										W		152,041
Basic and diluted net loss per share - New Rover Class A Common Stock											$	(0.17	)
Weighted average shares outstanding of Legacy Rover common stock - basic and diluted					29,837
Basic and diluted net loss per share - Legacy Rover				$	(0.45	)
Weighted average shares outstanding of Caravel Class A Common Stock - basic and diluted		27,500
Basic and diluted net loss per share - Caravel Class A Common Stock	$	—
Weighted average shares outstanding of Caravel Class B Common Stock - basic and diluted		6,875
Basic and diluted net loss per share - Caravel Class B Common Stock	$	(2.71	)

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.	Basis of Presentation

The Merger will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Caravel will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of New Rover will represent a continuation of the financial statements of Legacy Rover with the Merger treated as the equivalent of Legacy Rover issuing stock for the net assets of Caravel, accompanied by a recapitalization. The net assets of Caravel will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger will be presented as those of Legacy Rover in future reports of New Rover.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the historical unaudited condensed balance sheet for Caravel as of June 30, 2021 with the historical unaudited condensed consolidated balance sheet of Legacy Rover as of June 30, 2021, giving effect to the transaction as if the Merger and other events contemplated by the Business Combination Agreement had been consummated on June 30, 2021. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 combines the historical unaudited condensed statement of operations of Caravel for the six months ended June 30, 2021 and the historical unaudited condensed consolidated statement of operations of Legacy Rover for the six months ended June 30, 2021, giving effect to the transaction as if the Merger and other events contemplated by the Business Combination Agreement had been consummated on January 1, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines the historical audited statement of operations of Caravel for the period from September 18, 2020 (inception) through December 31, 2020, as restated, with the historical audited consolidated statement of operations of Legacy Rover for the year ended December 31, 2020, giving effect to the transaction as if the Merger and other events contemplated by the Business Combination Agreement had been consummated on January 1, 2020. In addition, the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 give effect to the repayment of Legacy Rover’s PPP Loan and Subordinated Credit Facility which occurred in connection with the Merger.

The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and the accompanying notes:

•

the (a) historical audited consolidated financial statements of Legacy Rover as of and for the year ended December 31, 2020 included in the Proxy Statement beginning on page F-2 and (b) historical unaudited condensed consolidated financial statements of Legacy Rover as of and for the six months ended June 30, 2021 included as Exhibit 99.1 to this Amendment No.1 to Current Report on Form 8-K/A and are incorporated herein by reference.

•

Management has made significant estimates and assumptions in its determination of the pro forma adjustments based on information available as of the date of filing this Amendment No. 1 to Current Report on Form 8-K/A. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented as additional information becomes available. Management considers this basis of presentation to be reasonable under the circumstances.

One-time direct and incremental transaction costs anticipated to be incurred prior to, or concurrent with, the Closing are reflected in the unaudited pro forma condensed combined balance sheet as a direct reduction to New Rover’s additional paid-in capital and are assumed to be cash settled.

2.	Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:

(A)

Reflects the liquidation and reclassification of $275.0 million of investments held in the Trust Account to cash and cash equivalents that becomes available for general use by New Rover following the Merger, prior to redemptions. See adjustment note (F) for actual redemptions in connection with the Merger closing.

(B)	Reflects the gross proceeds of $50.0 million from the issuance and sale of 5,000,000 shares of New Rover Class A Common Stock at $10.00 per share pursuant to the PIPE Investment entered into with PIPE Investors.

(C)	Reflects the cash payment of $9.6 million of deferred underwriters’ fees incurred during the Caravel IPO due upon completion of the Merger.

(D)

Represents the preliminary estimated direct and incremental transaction costs incurred by Caravel and Legacy Rover related to the Merger of approximately $25.6 million for underwriting/banking, legal, accounting and other fees reflected in the unaudited pro forma condensed combined balance sheet as a direct reduction to New Rover’s additional paid-in capital and are assumed to be cash settled. As of June 30, 2021, Legacy Rover had deferred transaction costs incurred of $4.8 million, of which $3.4 million was unpaid.

(E)	Reflects the reclassification of Caravel Class A Common Stock subject to possible redemption to permanent equity immediately prior to the Merger closing.

(F)	Represents the cash disbursed to redeem 14,677,808 shares of Caravel common stock for $146.8 million allocated to New Rover Class A Common Stock and additional paid-in capital using par value of $0.0001 per share at a redemption price of $10.00 per share.

(G)

Reflects the issuance of 8,000,000 shares of New Rover Class A Common Stock at $10.00 per share for proceeds of $80.0 million pursuant to the Sponsor Backstop Subscription Agreement and the issuance of 1,000,000 shares of New Rover Class A Common Stock at $10.00 per share for proceeds of $10.0 million pursuant to the Assignment Agreement.

(H)

Reflects the preliminary estimated fair value of the Earnout Shares contingently issuable to the Legacy Rover equity holders as of the Merger closing. The preliminary estimated fair values were determined using the most reliable information available. The actual fair values could change materially once the final valuation is determined at the Merger closing. Refer to Note 4 for more information.

(I)	Reflects the vesting of 3,437,500 Founder Shares upon the Merger closing and forfeiture of 975,873 Founder Shares as of the Merger closing. The fair value of the New Rover Class A Common Stock is $10.99 per share as of the Merger closing.

(J)

Reflect the preliminary estimated fair value of the Founder Shares contingently recallable from the Sponsor as of the Merger closing. The preliminary estimated fair values were determined using the most reliable information available. The actual fair values could change materially once the final valuation is determined at the Merger closing. Refer to Note 4 for more information.

(K)	Reflects the elimination of Caravel’s historical retained earnings with a corresponding adjustment to additional paid-in capital for New Rover in connection with the reverse recapitalization upon closing of the Merger.

(L)	Reflects the conversion of Legacy Rover redeemable convertible preferred stock into New Rover Class A Common Stock upon closing of the Merger.

(M)	Reflects the difference in par value between Legacy Rover of $0.00001 per share and Caravel of $0.0001 per share.

(N)	Reflects the preliminary estimated fair value of the Private Placement Warrants and Public Warrants after the forfeiture of 2,592,503 Private Placement Warrants upon the Merger closing.

(O)

Reflects the repayment of the Subordinated Credit Facility of $30.0 million in principal and $0.2 million of accrued interest, derecognition of the unamortized discount of $0.4 million related to the Subordinated Credit Facility, and the repayment of the PPP Loan of $8.1 million in principal and $0.1 million of accrued interest following the closing of the Merger.

(P)

Reflects the fair value of the New Rover Common Stock shares withheld by the Company upon the net exercise of outstanding stock options by the Legacy Rover CEO to cover the tax withholding and remittance obligations of the Company of $6.8 million. The net exercise of Legacy Rover Options by the CEO immediately before the Merger closing was contingent on the Merger closing.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 are as follows:

(Q)	Reflects the elimination of the change in fair value of the derivative warrant liability of 2,592,503 Private Placement Warrants due to their forfeiture upon closing of the Merger.

(R)

Reflects an adjustment to eliminate interest expense, amortization of discount and debt issuance cost on the Subordinated Credit Facility and the PPP Loan as a result of repayment and settlement of all amounts outstanding under the Subordinated Credit Facility and PPP Loan following the closing of the Merger.

(S)

The calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that Caravel’s IPO occurred as of January 1, 2020. The Merger is being reflected as if it had occurred on this date and the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares have been outstanding for the entire period (for the year ending December 31, 2020).

The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 are as follows:

(T)	Reflects the elimination of the change in fair value of the derivative warrant liability of 2,592,503 Private Placement Warrants due to their forfeiture upon closing of the Merger.

(U)	Reflects the elimination of investment income related to the investments held in the Caravel Trust Account.

(V)

Reflects an adjustment to eliminate interest expense, amortization of discount and debt issuance costs for the Subordinated Credit Facility and the PPP Loan as a result of repayment and settlement of all amounts outstanding under the Subordinated Credit Facility and PPP Loan following the closing of the Merger.

(W)

3.	Net Loss per Share

Represents the net loss per share calculated using the historical basic and dilutive weighted average shares outstanding, and the issuance of additional shares in connection with the Merger and other related events, assuming such additional shares were outstanding since January 1, 2020. As the Merger is being reflected as if it had occurred on January 1, 2020, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issued in connection with the Merger have been outstanding for the entire periods presented.

The unaudited pro forma condensed combined financial information has been prepared based on the following information for the year ended December 31, 2020 and for the six months ended June 30, 2021 (in thousands, except share and per share data):

	Year Ended December 31, 2020			Six Months Ended June 30, 2021
Pro forma net loss	$	(56,734	)	$	(26,425	)
Weighted average shares outstanding, basic and diluted		150,968,185			152,041,439
Pro forma net loss per share, basic and diluted – common stock	$	(0.38	)	$	(0.17	)
Weighted average shares calculation, basic and diluted
Caravel Stockholders		12,822,192			12,822,192
Sponsor and related parties ⁽¹⁾⁽²⁾		11,437,500			11,437,500
Legacy Rover equity holders		120,708,493			121,781,747
Third party investors in PIPE Investment and Assignment Agreement ⁽³⁾		6,000,000			6,000,000
		150,968,185			152,041,439

(1)	The pro forma basic and diluted shares include 8,000,000 shares of common stock the Sponsor purchased as part of the Sponsor Backstop Subscription Agreement.

(2)	The pro forma basis and diluted shares include 3,437,500 Founder Shares that vested and exclude 975,873 Founder Shares that were forfeited upon Merger closing. The remaining unvested Founder Shares of 2,461,627 are excluded from the pro forma basic and diluted shares outstanding.

(3)	The pro forma basic and diluted shares include 5,000,000 shares of common stock purchased as part of the PIPE Investment and 1,000,000 shares of common stock purchased as part of the Assignment Agreement.

Upon the Merger closing, the following outstanding shares of New Rover Class A Common Stock equivalents were excluded from the computation of pro forma diluted net loss per share for the scenarios presented because including them would have had an anti-dilutive effect:

	Year Ended December 31, 2020		Six Months Ended June 30, 2021
Private Placement Warrants ⁽²⁾		2,574,164		2,574,164
Public Warrants		5,500,000		5,500,000
Legacy Rover Options		20,412,603		20,412,603
Founder Shares ⁽¹⁾		2,461,627		2,461,627
		30,948,394		30,948,394

(1)	The Sponsor and related parties hold 6,875,000 Founder Shares that vest upon certain triggering events. Upon the Merger closing, 3,437,500 Founder Shares were vested, 975,873 were forfeited, and 2,461,627 Founder Shares remain outstanding and unvested.

(2)	Prior to the Merger closing, there were 5,166,667 Private Placement Warrants issued and outstanding. Upon the Merger closing, 2,592,503 Private Placement Warrants were forfeited and 2,574,164 Private Placement Warrants remain outstanding.

Following the Merger closing, Earnout Shares of 19,734,183 are excluded from the pro forma net loss per share anti-dilutive table for all the periods and scenarios presented as such shares are contingently issuable until the triggering events have been achieved.

4.	Earnout Shares and Founder Shares

The Earnout Shares and Founder Shares are expected to be accounted for as liability classified equity instruments that are earned upon achieving the triggering events, which include events that are not indexed to the New Rover Common Stock. The preliminary estimated fair value of the Earnout Shares is $202.9 million and the preliminary estimated fair value of the Founder Shares is $25.2 million.

The estimated fair values of the Earnout Shares and Founder Shares were determined by using a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the seven-year Earnout Period. The preliminary estimated fair values of Earnout Shares and Founder Shares were determined using the most reliable information available. Assumptions used in the preliminary valuation were as follows:

Current stock price: the current Caravel stock price as of July 30, 2021 was set at the deemed value of $10.99 per share for New Rover Common Stock.

Expected volatility: the volatility rate was determined by using an average of historical volatilities of selected industry peers deemed to be comparable to our business corresponding to the 7 year expected term of the awards.

Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of issuance for zero-coupon U.S. Treasury notes with maturities corresponding to the expected seven year term of the Earnout Period.

Expected term: The expected term is the seven year term of the Earnout Period.

Expected dividend yield: The expected dividend yield is zero as New Rover has never declared or paid cash dividends and have no current plans to do so during the expected term.

The actual fair values of Earnout Shares and Founder Shares are subject to change as additional information becomes available and additional analyses are performed and such changes could be material once the final valuation is determined at the Merger closing.